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HMRC internal manual

Shares and Assets Valuation Manual

HM Revenue & Customs
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IHT Business Property Relief: Excepted Assets - Introduction

Exclusion of value of excepted assets

BR is a substantial relief from tax. The function of s.112 is to prevent taxpayers from getting the benefit of BR for private assets by confining the relief to assets needed for the business. The section provides two sets of rules for achieving this. One set, in s.112(3), is concerned only with property within s.105(1)(d) and is dealt with in the Inheritance Tax instructions. The other set of rules applies to all other categories of s.105(1) business property and is dealt with in the following paragraphs.

General rules s.112(1)

Under s.112(1) the value of any “excepted assets” is to be left out of account for the purposes of the relief.

An asset is an “excepted” asset under s.112(2) and (5) if it was neither

  • used wholly or mainly for the purposes of the business in question throughout the two years (or such lesser period as the company owned the asset) immediately preceding the transfer of value.


  • required at the time of the transfer of value for future use for the purposes of the business in question.

Whether the “future use” test is satisfied is a question of evidence in the circumstances of the particular case. You should consider the nature and previous history of the business and such evidence as may be produced as to prospective development and capital outlay. In particular, you should examine carefully the extent to which cash, bank accounts, building society accounts and similar assets included in the accounts of a business may be excepted assets. The basic concept is modified in group situations (see this chapter at SVM111240) and in relation to land and buildings (see also this chapter at SVM111240).

  Additional Guidance: SVM150000