Q&As

X owned shares in a private limited company which X sold and invested the net sale proceeds in other assets. The original holding of shares would have been eligible for BPR if X had held them at their death and the replacement assets met the conditions for BPR, except that X held them for only one year before their death. Can X's executors claim BPR in respect of the replacement assets due to section 107 of the Inheritance Tax Act 1984?

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Produced in partnership with Paul Davies of Clarke Willmott
Published on LexisPSL on 24/12/2020

The following Private Client Q&A produced in partnership with Paul Davies of Clarke Willmott provides comprehensive and up to date legal information covering:

  • X owned shares in a private limited company which X sold and invested the net sale proceeds in other assets. The original holding of shares would have been eligible for BPR if X had held them at their death and the replacement assets met the conditions for BPR, except that X held them for only one year before their death. Can X's executors claim BPR in respect of the replacement assets due to section 107 of the Inheritance Tax Act 1984?

X owned shares in a private limited company which X sold and invested the net sale proceeds in other assets. The original holding of shares would have been eligible for BPR if X had held them at their death and the replacement assets met the conditions for BPR, except that X held them for only one year before their death. Can X's executors claim BPR in respect of the replacement assets due to section 107 of the Inheritance Tax Act 1984?

Shares are relevant business property if they meet certain conditions, one of which is that the shares have been owned for at least two years (section 106 of the Inheritance Tax Act 1984 (IHTA 1984)).

However, relevant business property is treated as satisfying the two-year ownership period if it ‘replaces’ (directly or indirectly) other property, provided (a) the ‘new’ property and the ‘old’ property were, between them, owned by the transferor for a total period of at least two years falling within the five years immediately preceding the transfer of value and (b) the ‘old’ property met all other criteria to be considered relevant business property (IHTA 1984, s 107(1)).

What this means, in practice, is if someone has relevant business property, which they have owned for two years, they can acquire replacement

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