SVM108070 - Inheritance Tax: General Approach to IHT Valuation Requests

In respect of occasions of charge on or after 6 April 1996 to 5 April 2026, including potentially exempt transfers made before that date which come into charge as a result of a death on or after that date, business relief (BR) will be available at 100% in many cases.

For deaths and other transfers from 6 April 2026 (and including transfers made within 7 years of a death on or after 6 April 2026 if they were made on or after 30 October 2024) the highest rate of relief (100%) will be available on the combined value of qualifying agricultural and/or business property up to £2.5 million, or up to £5m if unused allowance can be transferred from a pre-deceased spouse or civil partner. This will only be due on the chargeable value of relievable property and will not apply to exempt transfers of relievable property. Any value in respect of total relievable property which exceeds the allowance will qualify for relief at 50%. See IHTM25500. 

Additionally, from 6 April 2026 shares in companies listed on a market that does not meet the definition of ‘listed’ for HM Revenue and Customs (HMRC) purposes (such as Alternative Investment Market (AIM)) and shares that are traded on a foreign stock exchange that is not a recognised stock exchange, can now only qualify for 50% relief.

When considering BR or agricultural relief (AR), the following points in particular should be considered.

  • BR only applies to non-investment companies. It does not apply to investment companies. (see SVM111140).
  • BR generally applies to unquoted shares in companies. Securities - for example debentures or loan notes - can qualify for BR (under sections 105(1)(b), (ab) and (ad) IHTA 1984) but only if they gave the transferor control or contributed to their control immediately before the transfer. It is unusual for securities to confer votes on the holder and thus to contribute to control, so it is most unlikely that you will come across securities which do qualify for BR.
  • Typically, the asset will need to have been held for a minimum of 2 years prior to the occasion of charge, however, there are a number of situations where the ownership test is relaxed. See SVM111070 and SVM111080. When considering the replacement provisions of section 107 IHTA 1984, you should take care to check that the original (replaced) property would have qualified for BR if it had been the subject of a transfer.
  • Note that unlike s107(1) where the relevant business property connection condition has to be met, s107(4) ignores any such requirement provided "shares falling with section 105(1)(bb)...which are owned by the transferor...would under any of the provisions of sections 126 to 136 of the Taxation of Chargeable Gains Act 1992 Act be identified with other shares previously owned by him...treated for the purposes of section 106 as including their period of ownership of the other shares.

For example, X has £50,000 of loan notes with an unquoted company. The loan notes do not confer any rights other than that they are to be repaid at a certain date. Within two years of his death, X's loan notes are cancelled and replaced by 50,000 £1 Ordinary Shares in the company. X's 50,000 shares do not qualify for BR on the death. The two-year ownership test is not satisfied, nor are the provisions of section 107 because the loan notes would not have qualified for BR if they had been the subject of a transfer immediately before the shares were issued.

The usual instance where section 107 does apply is where, within two years of the transfer, unquoted shares are issued to a transferor in place of a sole trader business or interest in a partnership (non-investment) or in place of other shares in an unquoted non-investment company.

  • If the business of the company has both non-investment and investment elements or has a large cash sum not obviously required for business purposes, See SVM111220 onwards.

In IHT death cases, even though shares may qualify for 100% BR, you should be aware that sums due to the deceased from the company by way of loan account, undrawn remuneration, unpaid dividends and so on will not qualify for business relief.

Additional Guidance: SVM150000