Can I just please clarify this with you?

Can I just please clarify this with you?

Didn't find your answer?

My client and his wife and two children run a property business.

The business is operated as a partnership. Client and wife own some commercial 'units' and the business of the partnership is to maintain the units. Profits are shared equally on the basis that the two children work longer hours in the business to reflect the fact that mum and dad have effectively provided the capital.

Mum and Dad are due to retire and would like to gift the units in their entirety to the two children, who would continue the partnership.

My instincts tell me that the business of renting out commercial units does not constitute a 'trade' for the purposes of taper relief or hold over relief. I believe that the gift would trigger a taxable gain on which only non business asset taper relief would be available and there would be no holdover available either.

Because of the value of these units, I thought I ought to check!

Obviously there will be some inheritance tax experts reading this and screaming.... don't forget inheritance tax you idiot. So if any advice in this area is forthcomming it will be gratefully received but i am thinking that business property relief may not be available. If it is, presumably the best thing to do would be to avoid the gift until death?

Thanks everyone who cant sleep on Sunday nights!
Stormrider

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By AnonymousUser
05th Nov 2007 09:30

Almost
your instincts about trading are right but what you have overlooked is the extended meaning given to business asset from 6/4/04. Broadly from then until taper relief goes an asset which is used in anyone's trade will qualify. So unless they have let units to eg a charity or other non trading entity they should be OK at least for that period - obviously if they owned them before then then the relief will be tainted by a period of non-qualifying (think letting to a trading co may have qualified from 6/4/00 - so you might want to check)
Assuming you have the current values some calculations are needed to see whether to give away now or later.
Holdover relief as you say is not due and IHT BPR although sometimes more widely drawn for letting purposes I don't think would qualify either.

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