Claiming Business Property Relief to reduce your Inheritance Tax bill

There are a number of ways to reduce your Inheritance Tax (IHT) bill. Here we look at Business Property Relief (BPR) from Inheritance Tax.

Shares you own in businesses form part of your estate but BPR may allow you to pass on some of the business tax-free either through your will or when you are still alive. `

You can claim BPR on:

• a business or an interest in a business
• unlisted shares (shares that aren’t listed on a recognised stock exchange), including shares that are traded on the Alternative Investment Market
• a holding of shares or securities that you own which give you control of a company, that are fully listed on a recognised stock exchange
• any land, buildings, plant or machinery you own, used wholly or mainly in the business during the last two years before the business was passed on (or since your business acquired them if more recent)
• any land, buildings, plant or machinery used in your business and held in a trust that you have the right to benefit from

You can’t claim BPR if:

• the business or company mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments
• the business is a not-for-profit organisation
• the business is subject to a contract for sale unless the sale is to a company that will carry on the business and you’ll be paid wholly or mainly in shares of the acquiring business
• the company is being wound up unless this is part of a process to enable the business of the company to carry on

You can’t claim BPR on a business asset if the asset:

• also qualifies for Agricultural Relief
• was not used mainly for business in the two years immediately before you passed it on as a gift during your life or as part of your will
• is not required for future use in the business

If part of a non-qualifying asset is used in your business, that part might qualify for BPR.

For example, if you use one room in a building as a shop and the other rooms are used as your home, the shop will qualify for BPR but the rooms won’t.

Rates

If the asset qualifies for BPR, relief is given at either 50 or 100 per cent, depending on the type of asset.

For interest in a business, or a holding of shares in an unlisted company, then 100% relief is applicable.

The 50% rate is applicable to:

• shares controlling more than 50 % of the voting rights in a listed company
• land, buildings, plant or machinery used in a business that you are a partner in or control at the time of your death
• land, buildings, plant or machinery held in a trust where you have the right to benefit from the trust and use the assets in the trust in your business.

Contact us for further details:

Phone: 020 7354 3914