Valuation of a share in a partnership

IHT Business Property Relief is available at the rate of 100% for the value of property consisting of a “business or an interest in a business” (ss104(1)(a) and 105(1)(a) IHT Act 1984). Where the deceased, or other transferor, was carrying on business in partnership, his share in the partnership will be an “interest in a business” attracting the 100% rate of relief. The adviser of a member of a business partnership will need to bear in mind that where land or buildings, or plant and machinery, are owned by a member of a partnership and used for the purposes of its business by the partnership, the IHT Business Property Relief may be available but will only be available at the rate of 50% (see ss104(1)(b) and 105(1)(d) IHT Act 1984). Consequently, there is an IHT incentive to ensure that land, particularly by reason of its value, and its tendency to increase in value should be a partnership asset so that its value will attract Business Property Relief at the rate of 100% rather than 50%. However, such a transfer may have a very significant effect upon the rights of the parties, and the partner who has contributed the land to the partnership, so that it has become a partnership asset, may find that his rights in relation to the land are very different to what he might have assumed them to be, for example, on a dissolution of the partnership. This is what seems to have happened in Ham v Ham and Another [2013] EWCA Civ 1301.