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As we have seen in other articles in our business property relief signpost, Business property relief (BPR) is an incredibly attractive relief. This is no truer than for unquoted shares in trading companies. Here, the headline rate of relief is 100% of the value of the shares on either a lifetime transfer of shares or in the death estate.
Generally speaking, the shares need to be held for two years.
Unquoted or Quoted – That is the Question…
As referred to above, in order to obtain business property relief on shares then it is likely that one will need to hold unquoted shares. This is because to obtain relief in respect of quoted shares one must have control of the Company. For most people at least, control of a quoted company is rather unlikely!
However, perhaps surprisingly, for the purposes of business property relief, shares that are quoted on the Alternative Investment Market or AIM are considered as unquoted. This means that, assuming the activities of the Company meet the requirements of business property relief and the holding period is satisfied, then these shares will qualify for business property relief and at the headline rate of 100%
Where there is a way, then there is a will (pardon the pun). Accordingly, many investment firms offer ready-made AIM portfolios in which taxpayers can invest their cash. After two years, then these shares should qualify for business property relief.
Such arrangements can be useful for transferring value to trusts. Ordinarily, such a transfer would be immediately subject to IHT at 20%. However, if the AIM portfolio qualifies for BPR, then value can be transferred in to the trust under the cover of business property relief.
Where a taxpayer has previously sold out of their own family company then funds can be reinvested in such a portfolio to secure replacement property. This can be a handy tool.
It is not just AIM portfolios that are on the retail investment market. There are all kinds of trading investment plays which allow the taxpayer to invest cash and, after two years, shield this wealth from IHT.
The question is, for how long?
If you have any queries around AIM shares, BPR retail investments or inheritance tax in general, then please do get in touch.
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Business property relief AIM shares was last updated on 12 November 2019