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General Background on BPR
Business Property Relief, often referred to its acronym BPR as shorthand, is an extremely attractive inheritance tax (“IHT”) relief.
It potentially provides for a relief against IHT in respect of qualifying assets (relevant business property) in relation to both:
The value of this relief depends on the type of relevant business property under consideration.
Relief is available either at 100% or 50%
|Type of relevant business property||Rate|
|Trading business or an interest in a trading business.||100%|
|Securities in an unquoted trading company which give control of an unquoted company|
|Shares in an unquoted trading company|
|Shares in a quoted company which give control of the company||50%|
|Land / buildings /machinery / plant that are used wholly / mainly for the purposes of the trading business undertaken by either a company or a partnership|
|Land / buildings / machinery / plant made available under a life interest that are used in a trading business carried on by the beneficiary.|
Despite the name of the relief, simply being a ‘business’ is not enough to secure the relief. Instead, the business must satisfy the much higher bar and be a trading business.
Further, there is no BPR if the business or company is one of “wholly or mainly” in dealing in securities, stocks or shares, land or buildings or in the making or holding of investments.
As such, a business which is dealing in land, which is a trade at the basic level, will not qualify for BPR.
On the other hand, a Furnished Holiday Let (“FHL”) business may qualify as relevant business property for BPR purposes. However, be warned, this is an active area for case law. Please see our separate article on the issues for Furnished Holiday Lets.
Generally, the relevant business property must be held for 2 years before qualification. However, there are some wrinkles to this.
We have prepared a detailed article on these issues.
It should be noted that the definitions of relevant business property set out above provide no relief for assets that are used wholly / mainly for the business of a sole trader.
Land and property used by a business
Where, say, a property is used in a business there can be an issue. If that property is owned by the business then 100% relief is likely to be available on the value of the property on the transfer of shares / interest in the business.
However, if that property is held by the stakeholders and, say, let to the business then it is likely that only 50% relief would be available.
Director’s Loans v Shares
It should be noted from the definition of relevant business property that a director’s loan in favour of the director is not protected by business property relief. However, if this loan is converted in to equity then it will become relevant business property and potentially secure relief (assuming the other conditions are satisfied).
If you have any queries around business property, or inheritance tax in general, then please do get in touch.