Business Property Relief
Business Property Relief (BPR) is an inheritance tax relief applicable to particular types of business assets. It is available to both business owners who want to pass on their business to the next generation, and to those investing in shares of qualifying companies.
BPR is likely to be of interest to those people who wish to pass on their investments at the time of their death, whilst at the same using current legislation to help mitigate, their IHT liability. Holding investments that are eligible for BPR can in isolation provide a practical alternative to a trust based arrangement. Alternatively these two strategies may work well together to provide an effective all round solution in the mitigation of IHT.
BPR is only available on shares which meet certain criteria:
- The shares must be unquoted, or be shares in an AIM or PLUS listed business. Shares listed on the London Stock Exchange cannot generally be passed on at death without incurring inheritance tax. The exception is where the owner holds the controlling interest in the company. In this case, the shares would be exempt from inheritance tax under Business Property Relief.
- The business must ordinarily be managed for profit (there are exceptions). Businesses that deal mainly in securities, stocks or shares, land and buildings, or making or holding investments will not qualify.
- The asset has to be held at time of death and for at least two years before the holder dies. However, it is possible to replace assets with a different qualifying asset and roll over accrued inheritance tax relief. For example, a person might hold shares in one eligible company for one year, then sell them and buy into a different company. As long as they have held eligible shares for two out of the last five years, and hold them at death, those shares will be eligible for BPR.
On death, assets can either be passed on to a beneficiary, or they can be sold by the estate and distributed accordingly.