Dear Tax Experts,
I have a client who 100% owns 2 companies. One is potentially eligible for Agricultural Property Relief / Business Property Relief. The other holds some plant and machinery from a long-ceased trade and a substantial loan from the first, eligible company.
If that 'old' company formally releases the debt from the first (hopefully eligible) company, then the first company's value will rise, and the 'old' company's value will fall.
The overall value of the Estate will stay the same, but the value in the APR/BPR eligible company will have risen.
I don't think that Loan Relationships are a problem because the same person owns 100% of both companies, so they will be connected and I think the transactions are effectively struck out for CT purposes.
I don't think that CGT value-shifting applies, because nobody else stands to benefit, and/or there is no share disposal.
I am not seeing any IHT issues either. But I don't deal with IHT very much so I may be missing something obvious to IHT specialists.
I think an alternative might be to turn the 2 separate companies into a group, so that the debt cancels out. But that would be much more complex and time-consuming.
I would be most grateful if you would kindly let me know - is this pretty run of the mill or are there any issues I have missed?
Thank you
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