The Basics of Business Property Relief (BPR)
Business Property Relief or BPR is an area of tax planning that has become increasingly popular in recent years in the mitigation of inheritance tax (IHT) liabilities. Originally designed for entrepreneurs passing on family firms, BPR gives full relief from IHT on assets held for a minimum of two years. But of possibly greater significance is the fact that investors in assets such as portfolios of Alternative Investment Market (AIM) stocks retain access to their investments.
Investments that qualify for BPR include agricultural land, plant, machinery, forestry and suitably qualifying companies listed on AIM and the Enterprise Investment Scheme (EIS). Specifically, AIM stocks must be ‘trading companies’ to qualify for BPR, so things like resources stocks and most property companies do not qualify. Importantly AIM shares can now be held within an ISA wrapper, further sheltering the investment from Income Tax and Capital Gains Tax.
It is also worth noting that investments that use BPR are generally regarding by tax planners as the final stop, after the basic IHT reliefs and trust options have been used, or where the need to retain control of assets is paramount. BPR schemes are typically high risk.
This table summarises what qualifies for business relief & the rate of relief that can be obtained.
|Type||Rate of relief|
|A business or an interest in a business.||100%|
|Unquoted securities which on their own or combined with other unquoted shares or securities give control of an unquoted company||100%|
|Quoted shares which give control of the company||50%|
|Land or buildings, machinery or plant used wholly or mainly for the purposes of the business carried on by a company or partnership||50%|
|Land or buildings, machinery or plant available under a life interest and used in a business carried on by the individual||50%|
The investment within property/shares must be kept for 2 years in order to qualify for relief.
It is important to be aware that there are many situations where relief is not achievable, for example when:
- the business mainly deals with stocks, shares or securities, land/buildings or in the making or holding investments;
- the business is subject to a contract for sale or being wound up;
- the business is a not-for-profit organisation;
- the business generates investment income only;
- the business asset is already qualifying for agricultural relief;
- the business asset was not used for mainly business purpose within the immediate 2 years from passing it on from wills/gifts;
- the business asset is not intended for future use within the business and;
- Loans are made to a business.
It is possible to acquire some relief if a part of a non-qualifying asset is used within your business.
Important also seek professional advice before considering any tax schemes.