If there was a lifetime transfer from a partner’s capital
account you may need to consider the effect of the additional
IHTM25361) in IHTA/S113A and
IHTA84/S113B on the availability of the relief at the time of the
transfer and on the transferor's death.
Whether a transfer from a partner's capital account in the partnership qualifies for business relief at the time of the transfer depends on whether it effectively transfers an "interest in a business", which necessarily depends on the precise facts of the particular case. At one extreme, if the transfer reduces the transferor's interest in the business and enhances the similar interest of a co-partner, the transfer is within IHTA84/S105 (1)(a). So you should normally accept a transfer from the capital account of a partner to that of another partner as within IHTA84/S105 (1)(a); if however the circumstances suggest that in substance it was merely a gift of cash or its equivalent which could be withdrawn from the business, you should refer the case to your manager to consider whether relief should be refused. At the other extreme, a transfer to a third party who neither is nor becomes (in connection with that transfer) a partner clearly does not qualify for relief; the transfer is not of an interest in the business and the transferee is merely a creditor for the amount transferred to him.
(This text has been withheld because of exemptions in the Freedom of Information Act 2000)
For a transfer of an interest in any land or buildings, machinery or plant used by a partnership, there may be relief under IHTA84/S105 (1)(d) ( IHTM25225).
Under IHTA84/S110 (c) the net value of an interest in a business is ascertained without any regard to assets or liabilities other than those by reference to which the net value of the entire business would fall to be ascertained. This refers back to the rules ( IHTM25341) in IHTA84/S110 (a) and IHTA84/S110 (b). One example of the operation of this provision concerns a partner's Income Tax liability on his share of the partnership profits. As the partner's tax is not a liability incurred for the purposes of the business, it should not be taken into account in determining the net value of the partnership for the purposes of business relief.