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HMRC internal manual

Shares and Assets Valuation Manual

HM Revenue & Customs
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IHT Business Property Relief: Relief on lifetime transfers - (additional) tax payable on transferor’s death within seven years


Sections 113A and 113B contain additional conditions for lifetime transfers made within seven years of the death of the transferor. Except as stated in the next paragraph, the conditions apply to determine whether BR is available when calculating

  1. the value transferred by a failed PET s.113A(1)


  1. for all other lifetime chargeable transfers, the additional tax payable because of the transferor’s death. s.113A(2)

It is an essential pre-condition that:

where the transfer is a failed PET, the property was “relevant business property” at the time the transfer was made - in other words, the conditions for relief given earlier in this chapter were then satisfied


where the transfer was chargeable when made, it qualified for relief at that time.

The Additional Conditions for deaths on or after 6 April 1996

Where a PET of unquoted shares or securities becomes chargeable or additional tax becomes payable on a chargeable lifetime transfer of unquoted shares or securities as a result of a death on or after 6 April 1996, the only additional requirements provided by sections 113A(3)(a) and 113A (3A)(b) are that the transferee must have retained the gifted shares or securities until the transferor’s death (or his own death, if earlier) and that they remained unquoted throughout the period from the gift to the death. This relaxation of the original rules was effected by s.184 FA 1996, which amended s.113(3A)(b) so that it applied to all unquoted shares in a company.


In 2004, a father gives his son a 10% holding in an unquoted company. The father dies in 2007, at which time the shares are still held by the son and remain unquoted. Business relief is due (at 100%) irrespective of whether the conditions for business relief would still be satisfied if the transfer had taken place in 2007. Only the shares becoming quoted on a recognised stock exchange would preclude relief.

Where the death occurred before 6 April 1996, there was an additional test for most unquoted shares or securities - that they would still have been relevant business property if the transferee had made a gift of them at the date of death.

Retention by the transferee


The requirement in s.113A(3) is that “the transferee” owned “the original property” throughout the period from the date of transfer to the death of the transferor (or, under s.113A(4), the earlier death of the transferee). [This requirement is relaxed if the original property has been replaced, subject to certain strict conditions, detailed in this chapter at SVM111280.]

“The transferee”

“The transferee” is defined (by s.113A(8) for the purposes of s.113A as a whole) as the person who became the owner of the property on the transfer or, where on the transfer the property became (or remained) settled on discretionary trusts or other relevant property trusts subject to exit and ten-yearly charges, the trustees of the settlement. Except for discretionary trusts and other relevant property trusts subject to exit and ten-yearly charges, ownership means “beneficial ownership”, so a life tenant can be a transferee for this purpose, especially for pre-22 March 2006 gifts into trust. This is a complex area, so the Appeals Team and IHT should be consulted in any case of doubt.

  Additional Guidance: SVM150000