Claiming Business Relief on gifted shares

Trusts Discussion
1

I am dealing with an estate where shares qualifying for BPR have been gifted to the children of the deceased at two separate times within the last seven years (2018 and 2022).

The gifts have failed so will need to be included in the estate - had they not been gifted, they would have qualified for BR - with them being pulled back into the estate - can I claim Business Relief on them even though the deceased did not hold them himself in the two years prior to death? Has anyone dealt with this before?

2

s113A (3) IHTA preserves BPR if the transferee has owned the gifted property at all times from the date of gift until the transferor’s death and if on a notional transfer of it immediately before that death it would still qualify for BPR (but ignoring the 2 year ownership rule, so the intervening period can be of any length).

Jack Harper

3

If the shares qualified for BPR at the date of the gift, and would have qualified for BPR as at the date of death of the donor, had they continued to hold them then, yes, BPR can be claimed on the failed PETs.

If, say, the company had been taken over by a “listed” company in the intervening period, so that they would not have qualified for BPR on the death of the donor, BPR would not be available to claim for the failed PETs.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

4

Just jumping on this feed please. We are looking at a failed PET which was BPR at date of gift. Does the BPR come off before Annual Exemption?

Also, I believe I am correct in that the failed PET is included in the gross estate for RNRB purposes?
thank you

5

Hi Lucy
I believe the BPR comes off first to ascertain the value of the PET before the application of the AE.
No you do not take the PET into account for RNRB as that looks at the estate at the date of death. I believe it is now accepted that if you have a situation where a testator is terminally ill with an estate over £2m lifetime gifts before death to take the estate below £2m are good planning to preserve the RNRB

6

BPR is applied first and if there is any chargeable value remaining thereafter the annual exemption is then deducted from the post BPR figure [IHTA 1984 ss 104(1) and 3(1)].

RNRB only applies for offset against IHT arising at death on the deceased’s estate only (it has no application re failed PETs). In calculating the deceased’s estate (assets less liabilities) no account is taken of BPR.

Malcolm Finney