Business Property Relief (BPR) reduces the value of assets which would be subject to inheritance tax both on your death and also if you gift assets to others during your lifetime.
What is especially attractive with this relief is that the percentage by which the value of your estate is reduced for IHT purposes is, in most cases 100%.
So if your business is worth £4 million at the date of your death, this relief will save you inheritance tax of £1.6 million.
What makes your business interest eligible for BPR? In summary you should:
- Have the required business interests, and
- Fulfil the ownership requirement;
In addition your business must be carrying on a qualifying trade – details on this are given in the next section.
Below is a list of the main types of business interest that will qualify for relief and the rate available:
- Businesses owned by a sole trader / partners
- Shares in any unquoted trading company
- Securities owned by a >50% shareholder in an unquoted trading company
- Shares transferred out of a >50% holding in a quoted trading company
- Securities owned by a >50% shareholder in a quoted trading company
- Land/Buildings/Plant/Machinery owned by individual and used in the business/partnership he controls
In most cases property should have been held for two years to qualify for the relief.