SVM111250 - IHT Business Property Relief: Calculation of value attributable to ‘excepted assets’
Because of the diversity of circumstances of valuation, it is not possible to lay down detailed rules as to the calculation of that part of the value transferred to be left out of account in determining the value of relevant business property. The answer lies in a fair and even-handed approach to the calculation of the difference between the value of the shares arrived at with the excepted asset included in the company and the value with the excepted asset excluded.
For this purpose, where an ‘excepted asset’ was subject to a mortgage, charge or other debt at the valuation date, the net value of the asset should be looked at. An ‘excepted asset’ should not be reduced by a proportion of the uncharged debts. This is because we have to compare the value of the shares if the excepted asset were removed from the company with the value of the shares if it were not.
This does not prevent you taking into account the need for sufficient liquidity to cover the payment of liabilities in determining what constitutes an excepted asset in the first place - particularly as regards the amount to be treated as surplus cash. Once you have determined the amount of cash and/or other assets to be treated as ‘excepted assets’, you should not reduce them further.
Decisions in this area need to be commercially sensible and realistic and bear a measure of consistency with the means adopted for the valuation of shares.
Any value attributable to an excepted asset which is to be left out of account and restricted from business relief will be fully chargeable to IHT at the appropriate rate (after the Nil Rate Band, any transferable allowances and exemptions have been applied).
With effect 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, 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.
Additional Guidance: SVM150000