Business relief and CLTs

richallum

A client owns a business property worth £1m. The business that operates from it is separate, let's assume the value is £2m.

The property will qualify for BR at 50%. If it is gifted to a discretionary trust, is there any IHT to pay at the time and what IHT is payable if death occurs within 7 years?

les_cameron

I think
Gift £2,000,000

• Relief £1,000,000
• NRB £325,000
• 2 yrs AEA £6,000
• Taxable £669,000 x 20%.

Die within 7 yrs - revisit and run sums on 40% tax with credit for the tax paid (assuming the trust still owns the asset or else re run the sums without relief)

richallum

Thanks @les_cameron It's the £1m property that will go into the trust. The £2m business stays out.

les_cameron

Gift £1,000,000

Relief £500,000
NRB £325,000
2 yrs AEA £6,000
Taxable £169,000 x 20%.
Die within 7 yrs - revisit and run sums on 40% tax with credit for the tax paid (assuming the trust still owns the asset or else re run the sums without relief)