Trusts and Inheritance Tax

BPR overview

Produced by Tolley
  • 27 Oct 2021 19:01

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • BPR overview
  • Business property that qualifies for BPR
  • What is ‘relevant business property’?
  • The two-year ownership rule
  • Replacement property
  • Successive transfers of property
  • Business property that may not qualify for BPR
  • Business that are not trading (the excluded business rule)
  • Binding contracts for sale
  • Companies in liquidation
  • More...

BPR overview

Business property relief (BPR) is a relief that reduces the value of property on which IHT is charged. The reduction will generally be available where a transfer of business property is made.

The reduction will be at a rate of 50% or 100%, depending upon the type of business property concerned.

BPR is given automatically and it is not necessary to make a formal claim in order for BPR to apply. However, an intention to deduct BPR from the value of qualifying assets must be indicated on the inheritance tax account form IHT413.

Business property that qualifies for BPR

Property qualifies as business property if it meets three conditions:

  1. the property must have been owned for at least two years continuously before the transfer (which could be on death)

  2. the property must be ‘relevant business property’

  3. the business must be mainly trading (see below)

What is ‘relevant business property’?

The types of business property that potentially qualify for 100% BPR include:

  1. property consisting of a business. This is typically a sole proprietorship. The business property includes the value of the assets used in the business (premises, machinery, equipment, intellectual property and working capital) and is reduced by the liabilities of the business

  2. property consisting of an interest in a business. This is typically a partner’s share in a partnership

  3. loan notes in an unquoted company. The notes must give the transferor control of the company immediately before the transfer or before his death. This could be alone or in conjunction with other unquoted loan notes or unquoted shares of the company that the transferor owns

  4. unquoted shares in a company. Unquoted shares are those that are not listed on a recognised stock exchange. Shares listed on the Alternative Investment Market (AIM) are considered unquoted for this purpose

The types of business property that potentially qualify for 50% BPR are:

  1. land or buildings, machinery or plant used by a company. The asset must have been used for business purposes by

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