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Sale of 50 % of shares in Trading co By Holding Co. Will BPR still apply?

Sale of 50 % of shares in Trading co By Holding...

Afternoon, hope you can help me on something

If a Holding Co who itself owns the premises of its only subsiduary trading co, sold 50% of its shares in the trading co, would the abscence of a majority holding mean that BPR is lost on holding co shares?

 I hope that the answer 'no', although HMRC manuals without finding anything specific point to this being so.

Any help greatly appreciated.



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12th Nov 2009 08:30

In principle you lose BPR

This is because the shareholding in question is in a company that does not itself trade in a qualifying business. It is thus disqualified by IHTA s105(3). There is a let out in IHTA S105(4) if the business of the company consists of being the holding company of one or more companies that would otherwise qualify.

The definition of a holding company for this purpose is found at S1159 of CA2006 - which you should just check for the specific circumstances. But, in the vast majority of cases, your situation would not qualify as a holding company. Look at the ddetail of S1159 and see if you can fit your circumstances within that.


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By Anonymous
12th Nov 2009 09:22


I struggle to understand why Company Law is interacting with the definition of a holding company for tax purposes?


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12th Nov 2009 09:45

Thanks very much for your help

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12th Nov 2009 09:48

Thinking about it

Could the Holding co. Initially sell 49%, then make sure property is retransferred before final sale of 1 to remaining 51% of shares (carefully structured) and still benefit from BPR?

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12th Nov 2009 10:06

The Companies Act....

.. is brought into play by IHTA 84 s 103(2) (as amended) which directly imprts the CA 2006 definitions of "holding company" and "subsidiary" for the purposes of IHTA. It is, I agree, unusual for there to be such a direct link between tax law and company law.

I'm not sure I understand the restructuring thought. What you have to look at is what the position is once all the related transactions are concluded. If the outcome is that the shares in respect fo which BPR is sought are in a company which does not have a subsidiary (as defined in CA 2006) then you have to look at the business of that company. If the business is then simply investing in shares in a trading company which is not a subsidiary plus (possibly) owning a freehold which returns a rent then the company's business is clearly mainly one of holding investments, and the shares thus do not qualify for BPR.


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12th Nov 2009 10:11

thanks Jon, much appreciated

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