Business Property Relief (BPR) is a relief that reduces the taxable value of relevant business property for Inheritance Tax purposes on transfers made both during an individual's lifetime and on death.
Relevant business property includes assets such as a business, an interest in a business, shares in an unquoted trading company and land, buildings, machinery or plant owned by an individual personally but used wholly or mainly for business purposes by a partnership in which they are a partner or a company which they control.
In general, in order to qualify for BPR, the business property concerned must have been owned by the individual for two continuous years before death or transfer and meet certain conditions.
Relief is given at a rate of either 100% or 50% depending on the property concerned. A transfer of a business, an interest in a business or unquoted shares in a trading company would qualify for 100% BPR whilst the transfer of land, buildings, machinery or plant owned by an individual personally but used wholly or mainly for business purposes by a partnership in which they are a partner or a company they control will only qualify for 50% relief.
BPR will be restricted where “excepted assets” are held on the balance sheet of the business. An excepted asset for Inheritance Tax purposes is an asset that has not been used for the purposes of the business throughout the two year period to death or transfer and is not required for future use in the business. Excepted assets include investments, large cash deposits not required for a specific future purpose and properties held for rental or investment.
Further to this, BPR will be denied where a business consists, wholly or mainly, of dealing in loan notes or shares, dealing in land or buildings or making or holding investments. BPR will also be denied where the business property concerned is subject to a binding contract for sale.
BPR is a valuable relief for Inheritance Tax purposes and detailed lifetime planning, in what is a complex area, may be required in order to maximise the availability of this relief, both on lifetime transfers and on death.
Rennie Welch LLP accepts no liability on the basis of this article and detailed advice should be sought before entering into any transaction. If you require advice or assistance in connection with Business Property Relief or any other taxation matter, please contact Lynn Miller at Rennie Welch on 01573 224391 or by email at email@example.com
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