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Business relief gives a substantial relief from tax. The function of IHTA84/S112 is to prevent taxpayers from getting the benefit of business relief for private assets by confining the relief to assets needed for the business. IHTA84/S112 provides two sets of rules for achieving this.

• one set of rules (IHTM25223) in IHTA84/S112(3) which apply to land and buildings, machinery and plant (IHTM25222)
• another set of rules in IHTA84/S112(1) which apply to all other categories of relevant business property (IHTM25141)

Under IHTA84/S112(1) the value of any 鈥榚xcepted assets鈥� is to be left out of account for the purposes of business relief. In order not to be 鈥榚xcepted鈥� an asset must pass two tests:

• It must have been used wholly or mainly for the purposes of the business in question throughout the two years, or such lesser period as the transferor owned the asset (or a corresponding interest in the asset in the case of an interest in a business), immediately preceding the transfer of value, IHTA84/S112(2)(a) and IHTA84/S112(5).You should note that this test is not satisfied if the asset was used for the purposes of a previous business during the period in question.
• Also, it must be required at the time of the transfer of value for future use (IHTM25352) for the purposes of the business in question.