Blogger
Share this content
0
3
2388

IHT business relief using unlisted and listed shares

IHT business relief applies to unlisted shares (e.g. AIM) if they have been held for 2 years before death as well as on the date of death.  Alternatively, unlisted shares can be sold and then replaced by other unlisted shares and if the sequence of periods of unlisted share ownership adds up to 2 years before death then again business relief still applies.  However, if an unlisted share is replaced by a listed share (e.g., the AIM company re-lists on the main stock exchange) and subsequently sold to buy shares in another unlisted company, which is held for less than 2 years before death, does business relief apply?

Inheritance Tax Act 1984, section 107 (1) says "Property shall be treated as satisfying the condition in section 106 above if any other property concerned was such that, had the transfer of value been made immediately before it was replaced, it would (apart from section 106) have been relevant business property in relation to the transfer".  Does this imply that  the unlisted share must be sold for cash before the company re-lists on the main stock exchange and that cash used to buy another unlisted share? 

Replies

Please login or register to join the discussion.

The rules on replacement property is as follows per HMRC:-

What are the rules for replacement property?

Where the original relevant business property was disposed of before the transferor’s death and the proceeds were used to buy replacement property, the relief is not necessarily lost.

In order to still qualify for relief

the whole of the sale proceeds must have been used to purchase the replacement property, andboth the sale and purchase must have been arm’s length transactions taking place within three years of each other.

The replacement property must also be of such a nature that, if it was transferred by the transferee immediately before the death of the transferor, it would, apart from the minimum period of ownership requirement, qualify for relief.

I would say that he would need to make sure that he sells the AIM shares while it is business property to be sure that relief applies

Thanks (1)
avatar
27th Feb 2013 21:27

Replacement property and business relief

Thanks for your reply.

I suspected that the unlisted shares must be sold before they are listed on a recognized exchange.

Thanks (0)
avatar
10th Oct 2013 11:22

AIM shares into ISA?

Hi, could the OP or Arthur please mind answering a follow-up question on this?

If a client wants to transfer AIM shares held personally into an ISA by selling and immediately buying back in an ISA, does the IHT clock for BPR re-start or do the replacement rules as explained above cover this situation?

Many thanks in advance.

Thanks (0)