100 Exclusion of value of excepted assets

Summary

This section provides that relevant business property must be valued for the purposes of the relief as if certain assets were ignored i.e. assets not used for the purposes of the business concerned for the required length of time and assets belonging to a new business acquired within the relevant minimum ownership period. Where different companies within the same group carry on separate businesses, each separate business may qualify as part of the business concerned for the purposes of calculating relief attributable to shares in the holding company concerned. The section also provides that land, buildings, machinery or plant in the separate ownership of the disponer but used for the purposes of the business of a company or partnership must have been so used for the relevant minimum ownership period.

Details

(1) In determining the value of the relevant business property for the purposes of the relief, certain assets must be excluded. These are:

• any excepted assets within the meaning of subsection (2), or
• any excluded property within the meaning of subsection (8).

(2) “excepted assets” are any assets which were not used wholly or mainly for the purposes of the business concerned throughout the whole or the last 2 years of the relevant period. (The relevant period is defined in subsection (6)).

Where the business concerned is carried on by a company which is a member of a group, then any asset of any company within the group which is used for the purposes of the business of any company within the group is treated as use for the purpose of the business concerned, except in the case of a company whose membership of the group falls to be disregarded under section 99.

(3) The use of an asset for the purposes of a business to which section 93(3) relates (i.e. a business which consists wholly or mainly of dealing in currencies, securities, stocks or shares, land or buildings, or making or holding investments) is not treated as use for the purposes of the business concerned.

(4) The assets referred to in section 93(1)(e) (i.e. land or buildings, plant or machinery or plant owned by the disponer and used by a company controlled by him/her) should be excluded when determining the value of relevant business property unless certain conditions are met.

The conditions are that the asset must be used wholly or mainly for the purposes of the business throughout the following periods:

• 2 years immediately preceding the date of the inheritance in cases where the disponer’s interest in the business or in the shares in or securities of the company carrying on the business are taken on the death of the disponer; or
• 5 years immediately preceding the date of the gift or inheritance in all other cases.

Replacement assets will qualify provided the original asset and the replacement asset were used for periods which taken together comprised—

• in the case where the disponer’s interest in the business or the shares in or securities of the company carrying on the business are comprised in an inheritance taken on the date of death of the disponer, at least 2 years falling within the 3 years immediately preceding the date of the inheritance, or
• at least 5 years falling within the 6 years immediately preceding the date of the gift or inheritance in all other cases.

However, if the provisions of section 97 (waiving the 2 year minimum ownership rule where the beneficiary, or his/her spouse, of a gift or inheritance dies within 2 years of the gift or inheritance, provided that the first gift or inheritance would have met the conditions of the relief) apply, then the periods of use will be deemed to have been complied with if the asset or that asset and the replacement asset or assets was or were used wholly or mainly for the purposes of the business throughout—

• the period between the earlier benefit and the subsequent benefit referred to in section 97, or
• the part of that period during which it or they were in the beneficial ownership of the disponer or the disponer’s spouse/civil partner.

(5) Where only part of the land or building is used for the purposes of the business, the land or building will be treated as 2 separate assets. The part used exclusively for the business will be included in the determination of the value of the relevant business property. The remainder will be treated as an excepted asset.

(6) The term “relevant period”, in relation to an asset for the purposes of this section, is defined as the period immediately preceding the gift or inheritance during which the asset or, if the relevant business property is an interest in a business, the corresponding interest in the asset, was comprised in the disposition. If the business concerned is carried on by a company, the relevant period is the period during which the asset was beneficially owned by that company or by any other company which immediately before the gift or inheritance was a member of the same group.

(7) An asset will be deemed not to have been used wholly or mainly for the purposes of the business at any time when it was used wholly or mainly for the personal benefit of the disponer or of a relative of the disponer.

(8) That part of the value of shares in a company which is attributable to an entirely new business (i.e. not a replacement of an existing business) acquired during the minimum ownership period is excluded from the relief.

(9) The general replacement assets provisions for business relief will apply where one trading subsidiary in a group has been replaced by another qualifying company within the minimum ownership period laid down for the relief.

Relevant Date: Finance Act 2015