Business Property Relief (BPR)
This is one of the most important reliefs available for INHERITANCE TAX.
To qualify, there are two key conditions:
- The property must have been OWNED for a minimum of 2 YEARS.
- The property must be RELEVANT BUSINESS PROPERTY (applies WORLDWIDE)
Note: If the property is inherited due to the death of a spouse, the combined ownership period is taken into account.
Relevant Business Property
To qualify for Business Property Relief (BPR) an UNINCORPORATED business must be a TRADING business and the COMPANIES in which the individual has shares must be TRADING companies.
There is no relief available for an interest in an INVESTMENT business.
|UNINCORPORATED BUSINESS||UNQUOTED SHARES||QUOTED SHARES||ASSETS USED IN THE BUSINESS: LAND, BUILDINGS, PLANT & MACHINERY USED IN A BUSINESS|
|E.G. WHOLE SOLE TRADE BUSINESS OR PARTNERSHIP||INCLUDING AIM LISTED SHARES||MUST HAVE VOTING CONTROL (>50%) OF COMPANY||RELIEF ONLY AVAILABLE ON ASSETS USED BY A COMPANY CONTROLLED (>50%) BY THE DONOR OR A PARTNERSHIP IN WHICH THE DONOR IS A PARTNER.|
|100% RELIEF||100% RELIEF||50% RELIEF||50% RELIEF|
An individual may own an interest in a TRADING business but that business owns some INVESTMENT ASSETS. These investment assets are known as EXCEPTED ASSETS for INHERITANCE TAX purposes. In these situations, BUSINESS PROPERTY RELIEF is still available but it is RESTRICTED.
The main examples of EXCEPTED ASSETS are:
- LARGE CASH BALANCES in excess of reasonable business requirements.
- Investments in SHARES and SECURITIES.
- Investments in LAND & BUILDINGS which are LET.
Restriction of Business Property Relief
On the transfer of an UNINCORPORATED business (sole trades / interest in partnership) BUSINESS PROPERTY RELIEF is only available on BUSINESS ASSETS. No relief available for EXCEPTED ASSETS.
On the transfer of shares in a COMPANY with EXCEPTED ASSETS, BUSINESS PROPERTY RELIEF is available on the business asset proportion of the total assets of the business.
The RELIEF is calculated as follows:
TRANSFER OF VALUE x ((TOTAL VALUE OF ASSETS – VALUE OF EXCEPTED ASSETS) / TOTAL VALUE OF ASSETS)