I wondered if anybody has considered this point re the apportionment of close company liabilities.
A (a non-dom) dies holding 100% of JerseyCo.
JerseyCo holds £2m of cash and 100% of company B. Company B just holds a £2m UK property bought with a £1m mortgage. The value of company B is therefore £1m.
Under IHTA Sch 1A, para 2(5), liabilities of a close company are apportioned between all the assets of the close company. If JerseyCo held the property directly, the £1m mortgage debt would be apportioned between the property and the cash with the result that only half could be set against the property and £1.5m would be subject to IHT.
Q: Does the actual situation allow the full mortgage to be set against the value of the property (because company B has no other assets) or does para 2(5) operate on a group basis.
I don’t think there is any justification for the group basis but it seems too simple a solution to the apportioning problem. There are good (non-tax) reasons for having two companies so the TAAR should not apply.
Osborne Clarke LLP