IHT, Trusts, AIM and BR query!

Amy

Hello, I have a question regarding the Business Relief and AIM share changes announced in the Budget
We have a client who is the life tenant of an Immediate Post Death interest Trust established after March 2006. The Trust and the client hold Business Relief portfolios and AIM shares respectively, breakdown shown below:
Personal - most invested in 2021
BR (plan 1) - £208,000
BR (plan 2) - £431,000 - £70,000 of this was made in August 2022 so still in his Estate for IHT
AIM portfolio - £126,000
Total - £765,000 of which £126,000 is AIM

Trust
BR - £540,000
AIM portfolio - £263,000
Total – £803,00 of which £263,000 is AIM
His other assets are in excess of £1.1m which brings his total Estate (including the Trust) to c£2.7m.
Am I correct in thinking that the Trust assets will be treated separately to the Personal assets with regards to the £1million 100% exempt threshold for IHT from April 2026? Trust has £1 million limit and Client has a separate £1million limit?
Or as the Trust assets are deemed to be part of the clients Estate, would he just benefit from the £1million personal limit?
Also as it will be 50% BR flat rate on AIM, does AIM fall into the £1 million calculation?

Any thoughts would be massively appreciated!

TomLloyd_Read

In answer to the last question, the AIM shares don't use any of the £1m allowance (same as agricultural assets that do not qualify for 100% relief).

For the first part I'm guessing but as the trust has an IIP then the £1m would cover both trust and personal assets. In the post budget summary it is pretty clear only discretionary trusts will get the allowance.

les_cameron

We need to see the imminent draft legislation. They did suggest for trusts holding BR assets prior to the budget each trust would have its own £1m limit (and trusts set up after would get the limit split between them)

richallum

A related case I'm working on:

• client settled £5m of BR qualifying shares in their company A to trusts in early 2024
• holdover relief applied
• client has £2m shares in another unquoted company B they own

1. whats the IHT/BR position for the trust assuming they keep the shares indefinitely?
2. does the client have the £1m at 0% available on the company B shares?

Thanks

Amy

Thank you @les_cameron @TomLloyd_Read