(1). Madox
IHT
The sale of the cars has no IHT implications because it will not have resulted in a fall in the value of Madox’ estate. This is on the assumption that the cars were sold for market value.
However, when Madox acquires the unquoted shares, he will effectively have exchanged assets that do not qualify for business property relief (cars) for assets that do (unquoted shares). This will reduce the amount of IHT that will eventually be due on the whole of his estate.
CGT
There will be no CGT implications on the sale of the cars because they are exempt assets.
A chargeable gain or allowable loss will arise on a future disposal of the shares in XR3i Ltd. Gift holdover relief will be available if the shares are gifted rather than sold. Business asset disposal relief will be available but only if the necessary conditions are satisfied (including that Madox must be an employee or director of XR3i Ltd). Investor’s relief will not be available because Madox is purchasing the shares of an existing company as opposed to subscribing for the shares.
(2). Cortina
IHT
The gift of the painting is a potentially exempt transfer. Cortina may have an IHT liability if the relative were to die within seven years of the gift. The liability will depend on the value of the painting, the relative’s available nil rate band, and the availability of taper relief (by reference to the period of time between the gift and the death of the relative).
The painting will also increase the value of Cortina’s estate for the purposes of IHT on her death.
CGT
Cortina’s CGT base cost in the painting will be its market value at the time of the gift. A painting is not a qualifying asset for the purposes of gift holdover relief.