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At a glance

Business Property Relief (BPR) provides relief from Inheritance Tax (IHT) on the transfer of relevant business assets at a rate of 50% or 100%.

Relevant business property comprises of:

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%
Unquoted shares 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%

Relevant property must be held for at least two years in order to qualify for relief.

Pitfalls and planning points

Sole traders

  • No BPR is given for land or buildings, machinery or plant used wholly or mainly for the purposes of a sole trader business
  • BPR is given for the transfer of the business as a whole.

Partners

  • No BPR is given on a loan made to a partnership following retirement.
  • 100% relief is given for an interest in a partnership, compared to 50% for property lent to a partnership; it may be beneficial for the partnership to hold property so that it can attract 100% relief.
  • In Scotland, its inheritance laws can split family partnership property in different ratios to a partnership agreement.

Directors

  • No BPR is given in respect of loans made to a company - such as a credit balance on a directors' loan account.

Business activities

BPR is not available in respect of a business, or shares in a company that is:

  • Not carried on for gain (not for profit or not on a commercial basis), or
  • subject to a contract for sale or being wound up.

There is no BPR if the business,  or company is one of "wholly or mainly" in dealing in securities, stocks or shares, land or buildings or in the making or holding of investments.

A business which only generates investment income will not attract BPR, so this excludes:

  • A residential or commercial property letting business
  • A property dealing businesses
  • A serviced office business

Some business activities are borderline: whether they will qualify for relief depends on the nature of services provided, typically these include:

  • Holiday businesses
  • Property management
  • Property development - if there is also substantial letting and dealing
  • Mixed estates of farming and letting
  • Caravan parks - where there is letting, holidays and caravan sales

Certain activities are regarded as trading:

  • Farming (this is covered by Agricultural property relief)
  • Woodland management
  • Sporting - shooting and fishing