Business property relief applies to all trading businesses.
Excluded are businesses that do not trade. So any businesses that deal wholly or mainly in shares and securities or land and buildings, or those that make or hold investments will not qualify. For this purpose ‘mainly’ is taken to mean more than 50%.
Therefore, property investment businesses will not qualify for BPR whereas property developers such as house builders will qualify.
In addition a restriction to the relief may be applied if your business includes any assets that have not been used in the business throughout a two year period and are not required for the future use of the business. Examples of these might include surplus cash deposits, investments and properties held for rental.
HMRC recently confirmed that unless there is evidence showing that the surplus cash is being held for an identifiable future purpose, it is likely to have an adverse effect on the business property relief claim. It seems that holding a surplus cash buffer to weather economic difficulties may not give sufficient reason.
It is possible to separate out non-qualifying and qualifying activities so that 100% relief remains available against your trade. In a recent case we were able to restructure a family owned company to ensure that BPR was available against some rather than none of its value. This achieved an inheritance tax saving of approximately £800,000.