Inheritance Tax Act 1984 section 113B

Application of section 113A to replacement property

Section 113B preserves business property relief on lifetime transfers made within seven years of death where the recipient has sold the original business property and reinvested the entire proceeds in replacement business property.

• Where the transferee sells the original business property before the transferor's death and reinvests the whole of the sale proceeds in replacement property, business relief can still apply to the original lifetime transfer
• The replacement property must be acquired (or a binding contract entered into) within three years of the disposal, though HMRC may allow a longer period, and both the sale and purchase must be at arm's length
• The replacement property must be owned by the transferee at the transferor's death, qualify as relevant business property at that point, and between the original property and the replacement property there must be continuous ownership throughout the period from the original transfer to the death
• If the transferor dies after the original property is sold but before replacement property is acquired, relief is still available provided the replacement is purchased within the allowed period — and relief is given at the rate applicable when the original lifetime transfer was made

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