Trusts and Inheritance Tax

BPR ― practical tips

Produced by Tolley
  • 03 Nov 2021 11:52

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

  • BPR ― practical tips
  • Reviewing paperwork and establishing the facts
  • Wills
  • Partnership and shareholder agreements
  • Investment portfolio
  • Evidence of trading activities
  • Excluded property

BPR ― practical tips

This guidance note aims to give practical tips to those practitioners who are advising clients on IHT business property relief (BPR). These strategies are designed to give the taxpayer the best chance of securing BPR or improving the probability of securing BPR. Remember, there is no fail-safe way to guarantee BPR ― the law, as well as HMRC’s approach and attitude, are always subject to change.

This guidance note assumes a prior knowledge of the basic law regarding BPR. For a reminder, see the BPR overview guidance note.

Reviewing paperwork and establishing the facts

Periodically, reviewing your affairs and maintaining a BPR ‘paper-trail’ is one of the best things your clients can do. Not only does this ensure that their affairs are organised in the most efficient way, but it provides a body of evidence to support any claims for BPR (either by the taxpayer or by their executors).

The two-year ownership requirement for BPR can often be fairly clear-cut ― little can be done to alter the facts regarding ownership of shares. However, where the client is a sole trader or partner, when did the business begin? Is there evidence to support this? This is a much easier job for the client to undertake, rather than their executors after their death.

The point at which a business begins can be difficult to establish. For further information, see the Badges of trade guidance note.

Wills

A Will is a document that determines how your assets will pass when you die. For an introduction, see the Wills guidance note.

Firstly, dying without a Will (an intestacy), gives the deceased’s personal representative little opportunity for structuring the deceased’s affairs in an efficient (or tax efficient) way. Clients should always be encouraged to put a Will in place.

Taking this further, it has long been good practice to ensure that one’s Will is reviewed periodically, preferably every five years. This is not a ‘black and white’ rule, and reviews should take place after

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