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Business Property Relief: Essentials for Minimising Inheritance Tax

Business Property Relief (BPR) offers significant relief from Inheritance Tax (IHT), enabling business owners to pass on their assets with reduced tax burdens.

Understanding BPR is crucial for effective estate planning.


Business Property Relief

(Read Time: Approx. 2 minutes)

Topics Discussed:

  • Key types of business assets eligible for BPR.
  • Conditions and exceptions for BPR qualification.

Understanding Business Property Relief

Business Property Relief (BPR) allows for a reduction in Inheritance Tax (IHT) on the transfer of certain business assets.

The relief is available at two rates: 100% and 50%, depending on the type of asset.


Eligible Business Properties and Relief Rates

  1. A business or an interest in a business: 100% relief
  1. Unquoted shares, including those listed on the Alternative Investment Market (AIM): 100% relief
  1. Unquoted securities providing control of a company: 100% relief
  1. Quoted shares granting company control: 50% relief
  1. Land, buildings, machinery, or plant used in a business controlled by the individual or partnership: 50% relief
  1. Land or buildings, machinery, or plant under a life interest used in a business by the beneficiary: 50% relief

Conditions for BPR Qualification

To qualify for BPR, the property must generally be held for at least two years.

Additionally, the business must be conducted with the aim of making a profit and should not be subject to a contract for sale or winding up.

There are specific exclusions where no BPR is given:

  • Businesses primarily dealing in securities, stocks, shares, land, or buildings.
  • Businesses focused on making or holding investments.

Exceptions and Considerations

  • Sole Traders and Partnerships: Relief applies to the business as a whole rather than individual assets. There is no BPR for loans made to a partnership post-retirement.
  • Property Ownership and Control: Property owned by a shareholder and used by the company can only qualify for 50% relief, provided the shareholder controls the company.
  • Non-statutory Clearance: HMRC operates a procedure for BPR, ensuring clarity and compliance.
  • Preference Shares and Overseas Companies: Shares do not need voting rights to qualify. Preference shares and shares in overseas companies can be eligible for BPR.

Summary

Business Property Relief can significantly impact your estate planning and tax liabilities.

Ensuring that you meet all criteria and understanding the specific requirements can maximise the benefits of BPR.

Don’t let complex tax rules reduce your legacy.

Contact Help Me Legal today for expert guidance on inheritance tax planning.

Our experienced team, and our partnered tax firm, are ready to assist you in securing your business assets for the future.

Contact us using the form here to know more. Alternatively, call us on 01772 282768, or use our 24/7 WhatsApp line at +447816848188

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