Would appreciate members thoughts on whether Business Relief applies in the following scenario (relevant section is S.105 (1) (d)
A and B are husband and wife. Own Company L Ltd 50% each.
A and B own 30% each of Company M Ltd. Their daughter owns 30% and a manager 10%
Company L Ltd owns two factory buildings worth £3.5 million, which are let to Company M Ltd, which is a manufacturing business.
The simple question is whether the shares in company L Ltd qualify for Business Relief or whether they are deprived of Business relief as neither of them control M Ltd and M Ltd is not a partnership.
By virtue of related property A and B control each company (s269(2)) but they do not own the factory buildings personally and the shares of L Ltd as a standalone company are not business property if all it does is to let them to M Ltd. If the 2 companies were in a group, the entire group would attract BPR in full by virtue of s111 and s112 (2).
This could be achieved without CGT by a share exchange and “avoidance” of IHT (if that is what it would be rather than tax planning) is not a problem as s137 TCGA 1992 does not apply to IHT. It would still need to be for bona fide commercial reasons but clearance could be sought. If L Ltd is the acquirer the properties would not be at risk of M Ltd’s trading operations as it might be if M Ltd owned it. Possibly why there is currently no group. If the managers’s 10 % minority interest is not acquired by L Ltd he will not derive any benefit from the properties.