In many cases, shares will qualify for 100% BR so that the
question of the availability of instalments is irrelevant. In all
cases where 100% BR is not available, the availability of the
instalment option and interest relief should be considered and Form
Val 50 should be completed as appropriate unless a case is clearly
The instalment option applies to any shares or securities which contributed to control, determined as for business relief, immediately before the chargeable transfer (s.228 (1)(a) IHTA 1984).
In other cases the option is available in respect of shares (but not securities) where:
In the case of relevant property settlements (see this chapter
at SVM108050), references to the 'value transferred' include
references to the amount on which tax is then chargeable under the
tax claim (s.2(3) IHTA 1984).
In the case of a lifetime transfer the £20,000 value in the first condition refers to the value transferred by the chargeable transfer i.e. loss to the transferor's estate and not to the value of the gifted shares in isolation - see Chapter 30 of the Inheritance Tax Manual IHTM30256.
Valuers should bear in mind that even if tax could not be paid by instalments under the criteria which SAV can consider (s.228(1)(a) and (d) and s.228(3) IHTA), instalments may still be available under s.228(1)(b) and s.228(2) IHTA, but these are matters for the IHT caseworker to consider. Basically, s.228(2) means that if the value of the shares added to the value of other potential instalment property (e.g. houses and land) in an estate exceeds 20% of the taxable value of the estate, tax may be paid by instalments on the shares, however small their value. You, of course, are only expected to confirm the point on the basis of all the tests which you can consider.
The additional interest-free relief is available where the company's business is a 'qualifying business' determined as for business relief (s.234). Where the instalment option applies, therefore, SAV should also advise whether the 'qualifying business' test is satisfied. Almost always where we are concerned with post-6/4/96 occasions of charge, and 100% BR is not available, any instalments that are due will be without interest relief. For post-6/4/96 occasions of charge, instalments with interest relief would only apply if e.g. we were considering the value of shares in a trading company which the transferor had not held for 2 years (therefore, no BR but interest free instalments could still apply). If, say, some part of the value of the shares did not qualify for BR because an asset was left out of account under s.112 but the company was essentially a trading company, any instalments on the chargeable value of the shares would be with interest relief.
The IHT caseworker should be advised immediately of any case where the instalment option has been claimed but is clearly inappropriate.
Such notification should never be left until the valuation of the shares has beenagreed, because interest will be running on the outstanding tax.
Where it is known that the taxpayer has elected to pay by
instalments and it comes to light that the shares have been sold
for money or partly for money and partly for shares, the IHT
caseworker should be notified immediately.
The instalment facility is not lost where:
Where in the situation at (b) the shares received in exchange are subsequently sold, the instalment facility comes to an end on the sale.
|Additional Guidance: SVM150000|