IHTM25153 - Business interests:
Meaning of “business”
The IHTA 1984 does not define a "business" for the purposes of
business relief. However, there is some guidance in:
- IHTA84/S110, which provides that the value
of a business is arrived at on an assets less liabilities basis
and
- IHTA84/S103 (3), which contains specific
inclusions and exclusions.
These provisions apply to all types of relevant business
property (
IHTM25141) but you will see them most
frequently in connection with property consisting of a business or
a business interest (
IHTM25151).
IHTA84/S110 provides that:
- the value of a business or interest in a business is its net
value
- the value of a business is
- the value of the assets used in the business
(including goodwill)
- less the aggregate amount of any liabilities
incurred for the purposes of the business;
and
- the only assets and liabilities relevant to the value of an
interest in a business are those relevant under (b) above to the
entire business.
So, for example
- a milk quota treated as an asset distinct from the
land will normally constitute an asset used in the farming
business, so that on the transfer of the business as a whole the
milk quota may qualify for business relief under IHTA84/S105 (1)(a)
(but if exceptionally the milk quota is treated in effect as part
of the land and so qualifying for agricultural relief, do not also
allow business relief for it – see (
IHTM24251) )
- an interest by way of loan, such as a partnership
loan account, is a liability of the business and so is not part of
its net value under IHTA84/S110 (b)
- a partner's Income Tax liability in respect of his
share of the partnership profits is not a liability incurred for
the purposes of the business, so it should not be deducted in
calculating the net value of the partnership interest for the
purposes of business relief.
Under IHTA84/S103 (3) "business"
- includes a business carried on in the exercise of
a profession or vocation
- excludes a business carried on otherwise than for
gain.
There are also other provisions (
IHTM25261) excluding certain types of
businesses from relief.
Many stud farms are carried on otherwise than for gain and
you should refer cases of doubt via Technical Group (TG) to Shares
and Assets Valuation (SAV) (Livestock) for advice.
If business relief is claimed in respect of the business of
a painter, sculptor, musician or similar artist, you should refer
to TG.
SAV will advise on business relief in copyright.
