Business property relief on gifts to a trust

Business property relief on gifts to a trust

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A client who is 85 ownes some shares that would qualify for BPR. He also wishes to make some gifts over a period of time to his grandchildren to cover University fees.

The proposal that has come forward is that the shares should be transferred into a discreationary trust and then sold to provide funds to be distributed. The transfer would be a chargeable event for IHT purposes but no tax would be payable due to BPR.

However something I have read leads me to believe that if the client dies after the shares have been sold but within 7 years the BPR will be disapplied making tax payable. Is this correct?

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By Paula Sparrow
15th Mar 2012 16:04

You are right

BPR on the transfer into trust is only available if the property is still owned by the trust on the death of the donor if that happens within 7 years of the gift.

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By gbuckell
15th Mar 2012 17:40

Not quite true

It is correct that if shares are sold prior to death within 7 years of the gift, IHT on the transfer into trust will be recomputed without the BPR. However, this will not affect the estate itself. Thus if, for example, shares worth less than the nil rate band are transferred in, there will still be no tax on loss of BPR and the nil rate band is still available to the estate.

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