SVM108070 - Inheritance Tax:
General Approach to IHT Valuation Requests
In respect of occasions of charge on or after 6 April 1996
(including potentially exempt transfers made before that date which
come into charge as a result of a death on or after that date),
Business Relief will be available at 100% in many cases.
Once you are satisfied that all conditions for 100% relief
are met, you can conclude the valuation request on that basis and
there will be no need to agree a value for the shares in question.
Thus it will be possible to dispose of many valuation requests very
quickly. You should, however, take care to ensure that all the
conditions for relief are satisfied. Full details are given in
Chapter 111 of this manual
SVM111000 - but the following points in
particular should be borne in mind.
- BR only applies to
trading companies. It does not apply to investment
companies. (see Chapter 111 of this manual
- BR generally applies to
unquoted shares in companies. Securities - e.g.
debentures or loan notes - can qualify for BR (under s.105(1)(b)
only ifthey gave the transferor control or contributed to his
control immediatelybefore the transfer. It is very unusual for
securities to confer votes on the holder and thus to contribute to
control - so it is most unlikely that you will come across
securities which do qualify for BR. If you think BR may be due on
any securities, you should consult your Team Leader before coming
to a final decision.
- Usually, the two-year old ownership test
is straightforward. If, however, the two- year ownership test is
not satisfied, but it is claimed that it should be treated as
satisfied under ss.107, 108 or 109 IHTA, you should give the claim
careful consideration and take advice as necessary. Detailed
instructions are given at Chapter 111 of this manual
SVM111060 – SVM111080. When
considering the replacement provisions of s.107 IHTA, you should
take care to check that the original (replaced) property would have
qualified for BR if it had been the subject of a transfer.
E.g. X has £50,000 of loan notes with an unquoted
company. The loan notes do not confer any rights other than that
they are to be repaid at a certain date. Within two years of his
death, X's loan notes are cancelled and replaced by 50,000 £1
Ordinary Shares in the company. X's 50,000 shares do not qualify
for BR on the death. The two-year ownership test is not satisfied,
nor are the provisions of s.107 because the loan notes would not
have qualified for BR if they had been the subject of a transfer
immediately before the shares were issued.
The usual instance where s.107 does apply is where, within
two years of the transfer, unquoted shares are issued to a
transferor in place of a sole trader business or interest in a
partnership (trading not investment) or in place of other shares in
an unquoted trading company.
- If the business of the company has both
trading and investment elements or has a large cash sum not
obviously required for business purposes, you should follow the
instructions at Chapter 111 of this manual
- Even if BR is not available, you may still
be able to conclude the matter quickly if you are able to agree
that the taxable value of the shares (or the value transferred for
lifetime transfers) is not great enough to cause the taxable limit
('threshold') to be exceeded. If you are satisfied that this is the
case, you can report the position to the IHT caseworker on form Val
50 without agreeing a value. You should inform the taxpayer/agents
of your conclusion and confirm that this does not imply that a
value has been agreed. (See this chapter
SVM108110 to SVM108130 for more
In IHT death cases, even though shares may qualify for 100% BR,
you should be aware that
sums due to the deceased from the company by way
of loan account, undrawn remuneration, unpaid dividends etc. will
not qualify for business relief.