The following Trusts and Inheritance Tax guidance note by Tolley in association with Peter Rayney of Peter Rayney Tax Consulting Ltd provides comprehensive and up to date tax information covering:
The basic qualification rules for business property relief (BPR) are illustrated in the Flowchart - trading or investment business for BPR purposes.
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The main categories of relevant business property are set out in IHTA 1984, s 105(1). In broad terms the legislation is aimed at businesses that are mainly trading, but the scope of the relief is framed negatively. Thus, all businesses qualify unless they are wholly or mainly:
A business engaged in genuine property development should qualify (this is not an investment activity).
See the BPR guidance note.
The ‘mainly’ requirement means that the above prohibited land or investment activities will prevent BPR being available where they account for more than half of the total business operations. In determining whether a business qualifies for BPR, it is necessary to look at the nature of the business activities ‘in the round’.
This was demonstrated in the case of Farmer v another (executors of Farmer deceased) v CIR, which involved a farming company’s significant investment activities, comprising 22 tenancies of farm buildings and static caravans.
The capital employed in the lettings business was £1.25m, compared with £2.25m in the farming business. The rental income exceeded the farming profits and the last accounts showed that the rents exceeded the farming turnover.
The Revenue (as it then was)
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