SVM111030 - IHT Business Property
Relief – Changes in the rates of relief
Rates of Business Relief
Business relief was introduced for transfers on or after 7 April
1976 but the rates of relief for the various categories of relevant
business property have been increased over the years. The rates of
relief applicable at varying dates from 7 April 1976 are shown at
Appendix 1 of this chapter at
SVM111290. For occasions of charge on
or after 6 April 1996, the rate of BR is 100% for transfers in
respect of unquoted shares, subject to the conditions for relief
being satisfied.
For Inheritance Tax purposes the rates of relief apply to
transfers on death on or after the dates shown and also to PETs
which become chargeable as a result of a death after the relevant
date.
Example
X makes a PET out of his unquoted 10% shareholding
in 1991 and dies in 1997, still holding the balance of his
shareholding. Assuming all the other conditions for relief are
satisfied, the shares held at death qualify for 100% relief under
s105(1)(bb) IHTA 1984 as amended by the Finance Act 1996. The
shares transferred by the PET, even though made at a time when
small minority holdings qualified for only 30% relief, qualify for
100% relief as a result of the death after 5 April 1996.
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If a transfer of value is chargeable when made e.g. a gift
into a discretionary trust, any lifetime tax chargeable will be
calculated on the basis of the rate of business relief available at
the date of transfer - and, for cumulation purposes with later
gifts, this is also the appropriate rate. However, any additional
tax payable by reason of the transferor's death within 7 years will
be calculated on the basis of the rate of business relief
applicable at the date of death.
Example
Y transfers his entire 20% holding in an unquoted
company to the trustees of a discretionary trust in 1995. Lifetime
tax is calculated on the basis that the shares qualify for 50%
relief (the rate applicable to small minority holdings in 1995). On
Y's death in 1997, no additional tax is payable on the transfer
because the shares now qualify for BR at 100% as a result of the
Finance Act 1996.
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