Commentary

I7.120A BPR and excepted assets

IHT, trusts and estates

I7.120A BPR and excepted assets

I7.120A BPR and excepted assets

Before the business property relief (BPR) reduction is made, the value of the business, shares or securities is taken out of account to the extent that it is attributable to the value of any excepted assets1. HMRC emphasises that there is a two-stage process; first, assets not used in the business must be excluded, as they do not qualify for relief, and then the excluded assets test must be applied to the assets that are used in the business. See IHTM25341 for HMRC's approach.

An excepted asset is one which:

  1.  

    (a)     was not used wholly or mainly for the purposes of the business throughout the last two years of the period immediately before the transfer in which the transferor (or his firm) owned it (or the whole of that period if it was so owned for less than two years but qualified under the 'replacement' rules, and

  2.  

    (b)     is not required for future use by the business at the time of the transfer2.

For shares there is no guidance in the legislation as to how the apportionment between the excepted assets and the remaining value of the business is to be calculated. The method used in I7.120B Example 2 is suggested as a reasonable approach. This assumes valuation of the shares on asset basis. Smaller shareholdings may be valued on dividend yield basis and it may then be arguable that the presence of excepted assets in the company has no impact on the amount of BPR on

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