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HMRC internal manual

Shares and Assets Valuation Manual

IHT Business Property Relief: Effect of failure to satisfy the additional conditions

Part failure/part satisfaction

Under s.113A(5) where the additional conditions are satisfied as regards part only of the gifted property and not satisfied as regards the remainder, then a proportionate part of the value transferred is reduced.


A made a PET of unquoted shares in favour of B in 2005. The value transferred before relief is agreed at £200,000 on a loss to the estate basis. Before A’s death in 2007 B sells one-half of the holding for £150,000. BR is available on £100,000.

All other cases except part failure / part satisfaction


Where the additional conditions in s.113A are not satisfied the consequences depend on whether the transfer is a failed PET or was chargeable when made. This is a matter for the IHT Caseworker.

Transfer a failed PET

When the conditions for relief to be preserved are not satisfied, the effect of s.113A(1) is that for all purposes - primarily the tax payable on the transfer and the transferor’s cumulative total - the value transferred by a PET is ascertained on the basis of no business relief.


In 2003, A gave unquoted shares in a trading company to B. A dies in 2007 but by that time B has given the shares to his son C. The value transferred by the 2003 transfer [say £200,000] is brought into cumulation without any business relief.

Where the original transfer was chargeable when made, the value for the purpose of calculating lifetime tax on the gift and for cumulation with subsequent gifts retains the benefit of business relief but any (additional) tax payable as a result of the transferor’s death within seven years is chargeable on the basis that no business relief is due.

  Additional Guidance: SVM150000