SVM111130 - IHT Business Property Relief: Company subject to winding up - s.105(5)

Shares or securities in a company are disqualified from being ‘relevant business property’ if at the time of transfer

  • a winding-up order has been made in respect of the company, or
  • a resolution for its voluntary winding-up has been passed, or
  • it is otherwise in the process of liquidation - unless the business of the company is to be carried on after a reconstruction or amalgamation. The reconstruction or amalgamation has to be the purpose of the winding-up or liquidation or alternatively (to cover the belated salvage of a company’s business) must take place not later than one year after the transfer of value.

It is a question of evidence whether the purpose of the liquidation was the reconstruction or amalgamation of the company. Evidence will normally be available in the terms of documents addressed to shareholders. If it is not, the one year requirement may still be regarded as satisfied where the amalgamation or reconstruction had been substantially achieved by the end of the year and only matters of detail remained outstanding.

Where a company’s assets were being realised or whose business had ceased at the valuation date, it may be that s.105(5) is not in point but that s.103(3) will apply to deny relief.

Additional Guidance: SVM150000