Business Property Relief Holding Period – General Position
Generally speaking the relevant business property must be held for at least two years in order to qualify for relief. The type of the business carried on by the business property does not have to be the same for the two year holding period. However, there must have been a business throughout that period.
Further, the relevant assets of the business do not have to have been owned for this period, but the business itself needs to have been.
What is Meant by Ownership?
This is not specifically defined. However, HMRC takes beneficial ownership into account which seems to be the correct approach.
Shares & Securities
Shares or securities are not relevant business property for the purposes of business property relief (BPR) unless they were owned by the transferor either:
- For the two-year period; or
- Meets the requirements to be replacement property (see below)
Where there has been a company reconstruction then the period of ownership of both sets of shares are aggregated.
Relief is also available where a taxpayer owned business property and then replaced it with other qualifying property. However, the requirement is that, when taken together, the original property and the replacement property were owned for at least two years out of the five immediately preceding the transfer
It is also necessary that, but for the two-year minimum ownership period, the replaced property would have qualified in its own right.
Where one or more replacements have been made during the five-year period, the relief cannot exceed ‘what it would have been had the replacement or any one or more of the replacements not been made’. HMRC take this to mean that if the value of the replaced property is lower than that of the property replacing it then the excess will not attract relief.
Any number of replacements can be made during the five-year period. Further, HMRC’s view is that where one business replaces another it doesn’t matter that the businesses are not the same. For example, if Pierre sells a widget business and then 9 months later purchases a pet shop then both businesses would satisfy the test.
Business property relief holding period was last updated on 12 November 2019