Inheritance Tax Act 1984 section 112

Exclusion of value of excepted assets

Section 112 ensures that business property relief only applies to assets genuinely used for business purposes, by excluding "excepted assets" from the relief calculation.

• Assets not used wholly or mainly for the business in the two years before the transfer, and not needed for future business use, are "excepted assets" excluded from business property relief.
• Land, buildings, machinery and plant owned personally but used by a business have their own qualifying test: they must have been used for the business for at least two years in the five years before the transfer, allowing for replacement assets.
• Where only part of a property is used exclusively for business purposes, that part and the remainder are treated as separate assets, with the value apportioned on a just basis.
• An asset is treated as not used for business purposes during any period when it was used wholly or mainly for the personal benefit of the transferor or a connected person.