Business property relief
Written by Ray Coman
One of the most beneficial forms of relief from inheritance tax is for business property.
Business property relief of 100% applies to the transfer of an interest in a partnership or sole trader business or shares in an unlisted company. For the purpose of this relief, shares in an AIM listed company are regarded as unlisted. Business property relief at 50% a controlling interest of a listed company and land, building, machinery and plant owned by an individual used by a company he controls or in his partnership.
For the relief to apply the relevant business property must have been owned by the transferor throughout the two year period before the transfer.
Business property will reduce the value of an estate which is subject to inheritance tax when a person dies. However, business property relief is attractive for lifetime transfers since tax can effectively be avoided by surviving only two years, as opposed to seven years as applies to most other gifts.
BPR is not available if the business activities included investment in the two years prior to death. BPR is restricted to the business value of the property.
Where the relevant business property is subject to a binding contract (for example, where partners or shareholders are obliged buy a business interest on retirement or death of the transferor) for sale at the date of transfer, no BPR is given.
