Nil rate band discretionary trust with BPR assets


I am drafting a Will for a couple, one of whom has an interest in a business which I am almost certain will qualify for BPR. They have no children so no RNRB to consider. I am therefore proposing gifts into a nil rate band discretionary trust of the business interest plus a cash sum equal to the maximum that can be paid without iht becoming payable. Residue then to go on life interest for spouse to benefit from the spouse exemption.

However, I wish to ensure that on the death of the first to die, HMRC look at the BPR position and I understand they only do this if tax is at stake. I know I should not make the gift of the business interest into the trust conditional on it qualifying for BPR as this will definitely mean no tax is at stake.

My question is if I word the gift of cash going into the trust along the lines I have set out above, this is also aimed at there being no tax to pay on first death, regardless of the BPR position. Does this also mean HMRC will not consider the BPR position on first death?

Many thanks

Samantha Walker
Ellen Fay Solicitors

In order to force HMRC to consider the availability of APR or BPR you have to leave the BPR/APR assets specifically to a non exempt
beneficiary, e.g. by specifying the shares in the particular company, or possibly as a general gift of any unquoted shares to a non exempt beneficiary. Then you hope to get a ruling from HMRC within 2 years, so if the assets do not qualify for relief you can
appoint out to the spouse.

If you do not deal with the BPR/APR assets specifically under the Will, but simply include a standard NRBDT, the availability of the
relief is apportioned between the legacy and residue (s38 IHTA 1984 I think?).

Diana Smart
Gordons LLP

Yes, my understanding is that if it is clear that no IHT charge can arise on death, HMRC is unwilling to devote resources to consider the application of APR and/or BPR at that time.

Perhaps the will might provide for the discretionary trust to receive the shares and a cash sum equivalent to the maximum amout that may be given without IHT being payable with the gift of the shares being ignored for these purposes.

This will create a chargeable gift unless the shares qualify for 100% BPR.

Should HMRC insist that shares do not qualify for 100% BPR, or there is a real risk that negotiations with HMRC will continue beyond the second anniversary of death, the executors should be empowered to exercise the discretion so as to appoint the shares for the benefit of the surviving spouse, whether absolutely or by adding them to the residuary life interest.

Paul Saunders