Business Property Relief

On the face of it, inheritance tax appears to be huge at 40%.

However, there are things which do in effect reduce the amount of tax payable.

Probably the most widely known is the nil rate band and the new residence nil rate band soon to be introduced next year. Together with these there are various reliefs which are available dependent on the circumstances; one of these is Business Property Relief.

So what is Business Property Relief?

Under the Inheritance Tax Act 1984, provided the asset(s) satisfy the requirements set out below, there is relief from inheritance tax available of either 50% or 100% provided that the minimum ownership period is fulfilled – the asset must have been owned for at least two years, however it does not have to have been a relevant business property all of that time, just at the date of death.

100% Business Property Relief

Applicable if the relevant asset(s) consists of:

  1. A business or interest in a business;
  2. Securities of a company which are unquoted and which gave the transferor control of the company immediately before the transfer; or
  3. Any unquoted shares in a company.
50% Business Property Relief

Applicable if the relevant asset(s) consists of:

  1. Shares or securities in a company which are quoted and which gave the transferor control of the company before the transfer;
  2. Any land or building machinery or plant which – immediately before the transfer – was used wholly or mainly for the purposes of a business carried on by a company of which the transferor then had control or by a partnership where he was then a partner; or
  3. Any land or building, machinery or plant which immediately before the transfer was used wholly or mainly for the purposes of a business carried on by the transferor and was settled property in which he was then beneficially entitled to an interest in possession.
Great, so I own shares in a property management company, this satisfies the criteria right?

Unfortunately, this is unlikely to be the case. The following businesses will not qualify for the relief if the business deals ‘wholly or mainly’ with:

  1. Stocks, shares or securities;
  2. In land or buildings; or
  3. The making or holding of businesses

There have been many cases in relation to this and each are highly fact specific. Don’t assume that just because it’s a business you will receive Business Property Relief.

If you want to discuss Business Property Relief, please contact our specialist Wills, Probate & Trusts Solicitors in LeedsWakefieldBradfordManchester and London in 0113 299 4431.