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Favourite Nephew or Niece Relief

Favourite Nephew or Niece Relief allows you to treat your nephew or niece as your 'child' when giving them a gift or inheritance. This is subject to conditions.

Where the relief applies, your niece or nephew may use the Group A tax-free threshold, instead of the Group B tax-free threshold, for that gift or inheritance.

Your nephew or niece is a child of your:

  • brother
  • sister
  • brother's civil partner
  • sister's civil partner.

Conditions for the relief

Your nephew or niece must have worked for you for the five years immediately before they receive the gift or inheritance either:

  • for 15 hours per week in a small business (run by you and your spouse or civil partner)
  • or
  • for 24 hours per week in a larger business (that is, business where there are other employees).

The relief applies only to assets used in the business. It does not include investment assets which are in the Group B tax-free threshold.

What is a life interest?

A life interest is where you give a gift or inheritance to someone for their lifetime in the interim period before the intended person gets it. Where there is an intervening life interest, you may have stopped your interest in the business at an earlier date. In this case, your nephew or niece must have worked in the business for the five years immediately prior to that date.

  • Example

    John dies in 1996 and, in his will, he leaves his business to his wife, Mary, and on her death to John's niece, Anne. Anne worked full time in the business from 1990.

    When Mary dies in 2009, Anne inherits the business. Anne qualifies for Favourite Niece Relief because she worked in the business for five years before John's interest in the business ended (1996).

    If Anne worked in the business since 1992, she would not qualify for the relief. This is because she would have been working for only four years before John's interest ended.

Shares and Favourite Nephew or Niece Relief

Shares in a private company may qualify for this relief. The company must be a private trading company in which the person giving the gift is a director, and controls the company.

Discretionary trusts and Favourite Nephew or Niece Relief

Favourite Nephew or Niece Relief will not apply if the benefit is under a discretionary trust.

Business and non-business assets in the same gift or inheritance

The Group A threshold will only apply to business assets. If non-business assets are received in the same gift or inheritance, the Group B threshold will apply to the non-business assets.

Published: 26 September 2017 Print this page

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