IHTM25131 - Business relief: Outline of
business relief
The IHTA 1984 provides relief for certain types of business or
business property included in a lifetime transfer (
IHTM14000) or the deceased’s
death estate.
- The relief is available on a deemed transfer of
value as defined in IHTA84/S3 (4).
- The relief is available for the deceased’s
relevant business property (
IHTM25141) anywhere in the world,
and
- It applies to settled property included in the
death estate.
- The relief also applies to the discretionary trust
regime. A transfer of value includes an occasion on which tax is
chargeable on discretionary trusts and references to the value
transferred by a transfer of value and to a transferor are to be
construed as including respectively the amount on which tax is then
chargeable and the trustees of the settlement concerned,
IHTA84/S103 (1).
- In absence of any other special provisions, the
relief is not available on other occasions of charge, such as when
conditionally exempt property is subject to a recapture
charge.
- Business relief is due to the extent that
the value transferred by a transfer of value is attributable to
relevant business property. The relief takes the form of a
percentage reduction in the value attributable to the relevant
business property. The percentage reduction is deducted from the
value transferred by the transfer of value. This means the relief
is calculated:before the deduction of exemptions (
IHTM11000)
- before any grossing up (IHTM26001)
- before any deduction is allowed under
IHTA84/S165 for other tax borne by the donee.
For transfers after 10 March 1992 the percentage reduction is 50
or 100 depending on the type of business property transferred.
Business relief does not reduce the value of the property
concerned for IHT purposes so that
- an express provision, IHTA84/S39 A, is
incorporated to establish the relationship between the value of the
property and the value transferred for the purpose of quantifying
the spouse or civil partner etc exemptions (there are detailed
instructions about the allocation of exemption at (IHTM26100))
and
- no reduction is made in the
‘historic’ value of property taken into account in
determining the rate of tax chargeable in the discretionary trust
regime.
In the context of discretionary trusts, references to the value
transferred by a transfer of value are construed as including
references to the amount on which tax is chargeable. Accordingly,
in the unlikely event of there being a partially exempt occasion of
charge in the discretionary trust regime, the exemption is deducted
before business relief is allowed.
