More on Business Property Relief – the transfer of whole or part of a business
06 August 2008
In the case of Trustees of The Nelson Dance Family Settlement v HMRC (SpC 682) the Special Commissioner held that business property relief ("BPR") for inheritance tax purposes was available on transfers of value even where the transfer was not of the property itself (i.e. a business or an interest in a business) but simply reduced the value of that property.
Mr Dance carried on business as a farmer and owned certain properties which formed part of this business. A couple of years before he died in 2004, Mr Dance declared a trust over certain of the properties which gave rise to a transfer of value (since the value of his estate was reduced as a result).
The Appellants argued that the transfer of value was subject to BPR (and therefore no IHT was due) since the value transferred was attributable to the net value of the business. HMRC on the other hand said that there needed to be a transfer of the business, or part of a business capable of being a separate business, for BPR to be available.
The Special Commissioner found in favour of the Appellants on the reading of the wording of the legislation (which states that the relief is available where the value transferred by a transfer of value is attributable to the value of any relevant business property), and held that no actual transfer of the business is required. This was despite the fact that a number of leading texts, referred to in the judgment, suggest that the relief is only available when the actual assets consisting of the whole or part of a business are transferred.
This case potentially widens the generally accepted scope of BPR, although we understand that HMRC are appealing the decision.
In May this year HMRC launched a pilot clearance scheme in relation to uncertainty in the area of BPR (see http://www.hmrc.gov.uk/cap/clearanceiht.htm) and so taxpayers could consider applying for clearance in circumstances which give rise to similar issues to those raised in this case.