BPR on gift of shares

I am hoping the forum members will be able to advise me on the following:

My client wishes to gift shares in a family trading company to her children using a Deed of Variation. Her Husband died recently leaving everything to her including 100% of the shares in the family business. I believe that in order to claim BPR I will need to submit a corrective account to HMRC as the shares were passed to my client under the spouse exemption and no BPR was applied for (although, at the moment, I am assuming this as I did not deal with probate for the client). At a meeting with the clients accountant I was confidently told that BPR would apply but then they went on to confirm that it owned and let a residential property.

My query is whether BPR would apply to the investment property owned by the company. If the investment property cannot qualify for BPR then there is a potential IHT liability (the client is also looking to gift another asset which uses husbands entire NRB) I cannot gift the shares without the property being included. If my client simply gifted the shares and survived 7 years would this get around the problem?

Sharon Edelstyn
Phoenix Legal Group

Another option if you want to test the BPR question might be to do a DOV onto discretionary trusts with the wife included as a beneficiary.

Then make the BPR claim and if resolved successfully within 2 years you can appoint out to the children. If not resolved within that period or BPR is not granted then you can appoint out to the wife.

CGT may then be an issue if she still wants to gift the shares, unless other reliefs are then available.

Diana Smart
Gordons LLP

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