IHT Business Property Relief: At a glance - www.rossmartin.co.uk (2024)

What is Business Property Relief (BPR)? When does it apply? What are the conditions?

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This is a freeview 'At a glance' guide to Business Property Relief.

At a glance

Business Property Relief (BPR) provides relief from Inheritance Tax (IHT) on the transfer of relevant business assets at a rate of 50% or 100%.

Relevant business property comprises:

Relevant property must usually be held for at least two years in order to qualify for relief, although there are exceptions to this rule.See IHT Business Property Relief

Pitfalls and planning points

Sole traders

• 100% BPR is given for the transfer of the business as a whole.
• There is no BPR given for the transfer of land or buildings, machinery or plant used wholly or mainly for the purposes of a sole trader business, except in certain circ*mstances. See IHT Business Property Relief

Partners

• No BPR is given on a loan made to a partnership following retirement.
• 100% relief is given for an interest in a partnership, compared to 50% for property lent to or used by a partnership but held outside of it.See IHT Business Property Relieffor how to structure your partnership to achieve 100% relief.
• The IHT laws in Scotland may mean the position is slightly different.See IHT Business Property Relief.

Directors

• No BPR is given in respect of loans made to a company, such as a credit balance on adirector's loan account.
• Property that is owned by a shareholder and used by the company will only qualify for 50% BPR subject to certain conditions.See IHT Business Property Relief.

Business activities

BPR is not available in respect of a business, or shares in a companythat is:

• Not carried on for gain i.e. not for profit or not on a commercial basis.
• Subject to a contract for sale or being wound up.

There is no BPR if the business or companyis one of 'wholly or mainly' in dealing in securities, stocks or shares, land or buildings or in the making or holding of investments.

There is awealth of case law on the topic of 'wholly or mainly'. SeeIHT Business Property Relief for an analysis of the points to consider.

A business that only generates investment income will not attract BPR, so this excludes:

• A residential or commercial property letting business.
• A property dealing business.
• A serviced office business.

Some business activities are borderline and whether they will qualify for relief depends on the nature of services provided, typically these include:

• Holiday businesses.
• Property development.
• Various other land-related activities, seeIHT Business Property Relief for more details.

Certain activities are regarded as trading:

• Farming (this may also benefit fromAgricultural Property Relief).
• Woodland management.
• Sporting; shooting and fishing.

Excepted assets

Where BPR is available in respect of a business, relief will be restricted where excepted assets are held.

• An excepted asset is property that has not been used for the purposes of the business throughout the two years prior to transfer, nor was it required at the time of the transfer for future business use.

SeeIHT Business Property Relief for more details, including examples.

Useful guides on this topic

IHT Business Property Relief
A guide explaining what Business Property Relief is, when it can apply and pitfalls and planning points.

IHT Agricultural Property Relief
What is Agricultural Property Relief (APR)? When does it apply? What are the conditions and restrictions of the relief?

Woodlands: Overview
Woodlands and forestry ownershipcarry significant tax reliefs, including Income Tax, Capital Gains Tax (CGT) and Inheritance Tax (IHT).