Background
IHT is charged when an individual makes a transfer of assets – either whilst the individual is alive or on death. A number of exemptions and reliefs can reduce that charge, sometimes to nil. Transfers of business assets and unlisted shares may qualify for business property relief. Transfers of shares to a trust for the benefit of employees may also qualify for exemption under IHTA 1984, s 28. Such a trust is excluded from the relevant property trust regime and gifts to it are not subject to reservation of benefit. The principle behind this part of the legislation is clear in that it is intended to facilitate the future development and succession of a business by providing benefits and incentives for its employees without the overhead of an IHT charge.
The arrangements
S (a widow) wants to minimise her estate's exposure to IHT on her death. She could alter the spread in her investment portfolio by investing in AIM shares, but does not want to take the commercial risk and
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