Finance Act 2025

• Permanent Page URL

Amendment of Chapter 2 of Part 10 of Principal Act (business relief)

89. (1) The Principal Act is amended—

(a) in section 100, by the substitution of the following subsection for subsection (2):

“(2) (a) An asset is an excepted asset in relation to any relevant business property unless it was—

(i) used wholly or mainly for the purposes of the business concerned throughout the whole, or the last 2 years, of the relevant period, or

(ii) subject to paragraph (b), required at the date of a gift or inheritance to be used for a specific purpose of the business concerned within the period of 6 years commencing on that date,

but where the business concerned is carried on by a company which is a member of a group, the use of an asset for the purposes of a business carried on by another company which at the time of the use and immediately prior to the gift or inheritance was also a member of that group is treated as use for the purposes of the business concerned, unless that other company’s membership of the group is to be disregarded under section 99.

(b) Notwithstanding paragraph (a)(ii), where, at the date of a gift or inheritance, an asset is required to be used for a specific purpose of the business concerned within the period of 6 years commencing on that date, but the asset is not so used within that period, it shall be presumed, unless the contrary is shown, that the asset was an excepted asset in relation to any relevant business property and the taxable value of the gift or inheritance shall be determined accordingly.

(c) Where the taxable value of a gift or inheritance is to be determined in accordance with paragraph (b), an additional return shall be delivered to the Commissioners, and any outstanding tax paid, in accordance with section 46(9).”,

and

(b) in section 101, by the substitution of the following subsection for subsection (2):

“(2) (a) The reduction which would fall to be made under section 92 in respect of relevant business property comprised in a gift or inheritance shall cease to be applicable if and to the extent that the property, or any property which directly or indirectly replaces it—

(i) would not be relevant business property (apart from section 94 and the conditions attached to paragraphs (d) and (f) of section 93(1) and other than by reason of bankruptcy or a bona fide winding-up on grounds of insolvency) in relation to a notional gift of such property taken by the same donee or successor from the same disponer at any time within the relevant period, unless it would be relevant business property (apart from section 94 and the conditions attached to paragraphs (d) and (f) of section 93(1)) in relation to another such notional gift taken within a year after the first-mentioned notional gift, or

(ii) is disposed of in whole or in part within the relevant period and the full proceeds of the disposal are not used, within a year after the disposal, to replace the asset disposed of with other property (other than quoted shares or securities or unquoted shares or securities to which section 99(2)(b) relates) which would be relevant business property (apart from section 94 and the condition attached to section 93(1)(d)) in relation to a notional gift of that other property taken by the same donee or successor from the same disponer on the date of the replacement,

and tax is chargeable in respect of the gift or inheritance as if the property were not relevant business property, but—

(I) any land, building, machinery or plant which are comprised in the gift or inheritance, and which qualify as relevant business property by virtue of section 93(1)(e) shall, together with any similar property which has replaced such property, continue to be relevant business property for the purposes of this section for so long as they are used for the purposes of the business concerned, and

(II) this section shall not have effect where the donee or successor dies before the event which would otherwise cause the reduction to cease to be applicable.

(b) For the purposes of paragraph (a)(ii), where less than full consideration is received for the disposal, the full proceeds of the disposal shall be deemed to be an amount equal to the market value of the property disposed of immediately before the disposal.”.

(2) Subsection (1) shall not apply in relation to gifts or inheritances taken before 1 January 2026.