IHT business property relief and newly issued shares

There are few opportunities for ‘death bed’ tax planning within the IHT regime, once appropriate wills are in place. In particular the provisions of IHT Act 1984 governing business property relief contain a requirement that ‘relevant business property’ such as a business, a shareholding, or a shareholding in an unquoted trading company, should have been owned for two years before qualifying for relief (s106 IHT Act 1984). Transmuting cash, or some equivalent asset clearly not qualifying for relief into relevant business property, therefore appears to be a process that takes at least two years. The transmutation may, however, be instantaneously effected if the cash can be applied so as to increase the value of relevant business property which has already been owned for the crucial two-year period. Section 106 IHT Act 1984 merely requires the relevant business property has been owned for two years, not that its value should have remained the same for two years.