Business Property Relief

Definition

Business Property Relief (BPR) is an inheritance tax relief that can potentially reduce the taxable value of certain business-related assets when passed down within an estate. BPR aids in mitigating the inheritance tax burden, easing the financial transition for beneficiaries inheriting interest in a business or business-related property.

Examples

Unlisted Business Interests: If an individual owns shares in an unlisted company or a partnership share, these interests may qualify for 100% relief from inheritance tax.
Land or Buildings: Land or buildings owned by the donor that are actively used within the business and in which the donor held control may attract a relief of 50% from inheritance tax.
Controlling Interest in Listed Company: A donor who owns a controlling interest in a listed company may be eligible for 50% relief.

Frequently Asked Questions

1. What types of businesses qualify for Business Property Relief?

Generally, businesses involved in trading rather than investment activities typically qualify for BPR. Investment businesses, e.g., those solely involved in property letting, may not qualify.

2. What is the duration of ownership required for an asset to qualify for BPR?

The business property must usually have been owned for at least two years prior to the claim for BPR to be valid.

3. Can BPR apply to a mix of trading and investment activities?

Yes, but the business must mainly be a trading company rather than an investment company to qualify for BPR.

4. Does BPR apply automatically upon death?

No, claims for BPR need to be explicitly made when valuing the estate for inheritance tax purposes.

1. Inheritance Tax

Inheritance tax (IHT) is a tax on the estate of someone who has died—their money, possessions, and property. The rate and applicability can vary based on the value of the estate and its composition.

2. Estate Planning

Estate planning involves making arrangements for the management and disposal of a person’s estate during their life and at and after death to optimize aspects such as taxes.

3. Gift Relief

Gift Relief allows deferral of capital gains tax on assets gifted, primarily aimed at benefiting business assets under certain conditions.

Online Resources

Suggested Books for Further Studies

“Tolleys Tax Planning 2023-24” by Tolley: Covers comprehensive aspects of tax planning, including inheritance tax and BPR.
“Tax Planning for Family and Owner-Managed Companies” by Peter Rayney: Focuses on tax planning, with dedicated sections on business property relief.
“The Business Tax Toolkit 2023” by Emma Rawson: A practitioner’s guide to handling business taxes effectively, including BPR.

Accounting Basics: Business Property Relief Fundamentals Quiz

### For an interest in an unlisted business, what percentage relief is offered by BPR? - [x] 100% - [ ] 75% - [ ] 50% - [ ] 25% > **Explanation:** Interests in unlisted businesses attract 100% relief under BPR, fully exempting them from inheritance tax. ### What relief is provided to land or buildings used in a business controlled by the donor? - [x] 50% - [ ] 100% - [ ] 75% - [ ] 25% > **Explanation:** Land or buildings owned and used in a company or partnership controlled by the donor attract 50% relief from inheritance tax. ### What percentage relief does a majority controlling interest in a listed company attract? - [x] 50% - [ ] 100% - [ ] 75% - [ ] 25% > **Explanation:** A majority controlling interest in a listed company is eligible for 50% relief under BPR. ### Does BPR apply to investment companies? - [ ] Yes - [x] No - [ ] Sometimes - [ ] Case-by-case basis > **Explanation:** BPR usually does not apply to companies mainly involved in investment activities, as the relief targets trading businesses. ### What is the required ownership period for assets to qualify for BPR? - [ ] 1 year - [x] 2 years - [ ] 3 years - [ ] 4 years > **Explanation:** Business property must generally be owned for at least two years to qualify for Business Property Relief. ### Which type of asset can attract 100% Business Property Relief? - [ ] Listed company shares - [x] Unlisted company shares - [ ] Investment property - [ ] Personal residential property > **Explanation:** Shares in an unlisted company can attract 100% BPR, making them fully exempt from inheritance tax. ### When should a BPR claim be made? - [ ] After probate - [x] During estate valuation for inheritance tax purposes - [ ] At any time - [ ] A year after inheritance > **Explanation:** BPR claims should be made during the valuation of the estate for inheritance tax to benefit from the relief. ### What kind of business activities primarily qualify for BPR? - [ ] Investment activities - [x] Trading activities - [ ] Charitable activities - [ ] Real estate development > **Explanation:** Trading businesses primarily qualify for BPR, whereas investment activities typically do not. ### Can BPR apply to businesses with both trading and investment components? - [x] Yes, mainly trading businesses - [ ] No - [ ] Only under special conditions - [ ] Only small businesses > **Explanation:** Businesses with both trading and investment components can qualify for BPR if they are mainly involved in trading activities. ### Does BPR apply automatically on the death of a business owner? - [ ] Yes - [x] No - [ ] Sometimes - [ ] Case-by-case basis > **Explanation:** BPR does not apply automatically and must be explicitly claimed during the estate's valuation process for inheritance tax.

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