Exit charge where BPR no longer due

Trusts Discussion
1

I can see that a question was asked the alternative way but I wanted to check my understanding of an exit charge between ten year charges when BPR has been lost.

At the last ten year charge, the only asset in the company was company shares and the company was trading. BPR was due in full so the effective rate of tax is 0%.

Since then the company has ceased trading and so was investment only in the period prior to the exit.

s65 and s69 both refer to the effective rate being the rate at the last ten year charge. Any adjustments refer to property being relevent property added etc but there is no mention of an adjustment where the relief previously available is no longer applicable.

So in our case, the value of the property leaving the trust is £736,079 but the effective rate at the last ten year charge on this is 0% so nil tax due on the exit? It doesn’t seem that this can be right but I cannot find anything in the legislation which adjusts the last TYA effective rate where BPR has been lost?

2

IHTM42081 indicates that the TYA charge is on the value of relevant property net of BPR. This is HMRC’s interpretation of the rather vague phrase in s64(1) IHTA “the value of the property or part at that time”. In my view a judge would agree.There is nothing in any of the RPT charging sections or those dictating the rate of charge, most obviously s69, or elsewhere in the Act which requires the rate charged at the last TYA, if calculated after BPR, to be recalculated for a later chargeable event before the next TYA at a time when the property charged has by then ceased to qualify.

Jack Harper