If there was a lifetime transfer from a partner’s capital
account you may need to consider the effect of the additional
conditions (
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could be withdrawn from the business, you should refer the case to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.
