Inheritance Tax Act 1984 section 109

Successive transfers

Section 109 deals with situations where business property is transferred more than once in quick succession and the normal two-year minimum ownership requirement for business property relief would not be met by the later transferor.

• Where business property passes on an earlier transfer that qualified (or could have qualified) for business property relief, and the recipient (or their spouse or civil partner) then makes a subsequent transfer of the same or replacement property, the two-year ownership requirement can be waived — provided at least one of the two transfers was made on death.
• If the property has been replaced between the two transfers, the relief on the subsequent transfer is capped at the amount that would have applied to the original property, preventing a person from swapping into a more valuable asset shortly before death or making a transfer.
• Replacements that arise from the formation, alteration or dissolution of a partnership, or from the acquisition of a business by a company controlled by the former owner, are ignored when applying the replacement cap.
• If only part of the value of the property was reflected in the earlier transfer (for example, because it was a part-purchase), the relief on the subsequent transfer is restricted to the same proportion.