IHTM25314 - Replacement property: Minority holdings of unquoted shares

IHTA84/S107 (4), with effect from 6 April 1996, provides that, without prejudice to subsection (1), shares within IHTA84/S105 (1) (bb) [i.e. any unquoted shares], provided that

• they are owned by the transferor immediately before the transfer; and
• they would, under TCGA92/S126 – S136(capital reorganisation, company reorganisation or amalgamation) be identified with other shares previously owned by him,

will have their period of ownership treated as including the period of ownership of the original shares. So if, for example, there was a capital reorganisation just six months before the transfer, but the earlier shares had been held for five years, the period of ownership of the earlier shares would be taken into account if they themselves would have qualified for the relief.

As a result of FA96/S184 (6) (b) (ii)this amendment applies to both transfers of value on or after 6 April 1996 and to a death charge on or after that date on an earlier transfer.

The previous position had been that IHTA84/S107 (4) had applied to shares within the earlier IHTA/S105 (1) (bb) and also IHTA84/S105 (1) (c). The difference was that IHTA84/S107 (1) had been disapplied from such shares, so if A had sold shares in X Ltd within two years of his death and bought with the proceeds a non controlling interest in Y Ltd, both being unquoted companies, business relief would not be available because the ownership test ( IHTM25301) was not satisfied and the replacement property provisions ( IHTM25311) did not apply.