Trading and investment businesses

By Tolley in association with Peter Rayney of Peter Rayney Tax Consulting Ltd

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:

  • Trading and investment businesses
  • Introduction
  • Relevant business property
  • Non-qualifying investment activities
  • Exemption for qualifying holding companies
  • Excepted assets
  • Determining BPR status of certain corporate structures

This document discusses about the various reliefs available for relevant property businesses. This also covers the meaning of non-qualifying investment activities, exemptions available for qualifying holding companies, excepted assets and determining BPR status of certain corporate structures.



The basic qualification rules for business property relief (BPR) are illustrated in the Flowchart - trading or investment business for BPR purposes.

Please note that all cases below are subscription sensitive.

Relevant business property

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:

  • dealing in shares or securities
  • dealing in land or buildings
  • making or holding investments

A business engaged in genuine property development should qualify (this is not an investment activity).

Executors of Piercy (deceased) v Revenue and Customs Commissioners [2008] STC (SCD) 858

See the BPR guidance note.

Non-qualifying investment activities

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.

Farmer v another (executors of Farmer deceased) v CIR [1999] STC (SCD) 321

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)

More on BPR planning: