(1).
IHT
Healey had owned the unquoted shares for more than two years. Accordingly, the shares will qualify for 100% business property relief (BPR) provided the company’s business does not consist mainly of dealing in securities or land or buildings or the making or holding of investments. In addition, where BPR is available, it will be restricted if the company owns assets that have not been used in the business in the previous two years and are not required for business purposes in the future.
Any amount that is not covered by BPR will be subject to IHT at 40% unless Healey’s chargeable transfers in the seven years prior to death are less than £325,000, such that there is some or all of the nil rate band available.
Accordingly, the minimum IHT liability will be nil where the whole of the value of the shares is covered by BPR and/or the nil rate band. The maximum IHT liability is £36,000 (£90,000 x 40%).
CGT
There is no CGT on death. Accordingly, the increase in value of the shares since the date of purchase will not be subject to CGT. The person who inherits the shares will have a base cost for the purposes of CGT of £90,000.
(2). Francis
| CGT | IHT | |
|---|---|---|
| Lifetime gift | Nil – Exempt as Francis's private residence The last two months will be exempt under the final nine months rule | No IHT unless Francis dies within seven years of the gift If Francis dies within seven years IHT will be charged at 40% on £520,000 (as reduced by any available annual exemptions) less any available nil band. 20% taper relief will be available if Francis survives the gift by three years. This relief increases by 20% for each complete year that Francis survives the gift. |
| Gift via will | Nil – No CGT on death | The value of the house at the date of death will be included in Francis’ death estate. Maximum IHT will be 40% of the value of the house. IHT will be lower if there is any nil band available to reduce the estate. |