IHT on lifetime gifts - 7 year rule

[Bluemincat]

The government website says that gifts that are subject to the 7 year rule (which tapers IHT if the gift giver dies within 7 years) include:

1. money
2. household and personal goods, for example, furniture, jewellery or antiques
3. a house, land or buildings
4. stocks and shares listed on the London Stock Exchange
5. unlisted shares you held for less than 2 years before your death

What if you are given shares in a private company that are not listed on the LSE and the gift giver held them for more than 2 years before their death? It seems odd that it only applies to listed shares or those held for less than 2 years.

What does it mean if the 7 year rule doesn't apply? Does no IHT arise at all? Or is it always at 40% and there is no tapered relief?

I'm not great on inheritance tax but have you looked at whether business relief applies?

Not that that helps on the taper relief question, but if BR does apply you don't need to worry about taper relief as you'd just apply BR.

https://www.ts-p.co.uk/insights/what-to-consider-when-giving-away-shares-in-the-family-company/

Unlisted shares you’ve held for more than 2 years attract business property relief so are not subject to IHT. You might find this helpful: https://www.cronertaxwise.com/community/260723-business-property-relief-on-gift-of-shares-within-7-years-of-death/

Thank you but I'm not sure if this applies as the shares have now been sold and the company wound down?

Sorry I should have said that but didn't realise it was relevant.

So when the gift was given it was shares but those shares have now been converted to money and the shares no longer exist. Does this count as a gift of money or shares? I can't seem to find anything on this point.

I confidently told a friend I would find out for him and now regret that!

I think for BPR to apply they would have to still be held as unquoted shares. So if they’ve been sold, I would expect they’d be treated as any other PET and the 7 year rule would apply.

Thanks, that makes sense.

As the previous poster says, I believe that if the shares are still held at the time of death (or for seven years whichever comes first) then they are disregarded for IHT purposes.

If the shares have since been sold then it would be counted as just a PET and subject to the seven year tapering.

Also, there may have been a CGT liability when the shares were sold.

This should help: https://www.accountingweb.co.uk/community/industry-insights/avoid-the-bpr-trap-with-lifetime-gifts