Chapter: 2 - Inheritance Tax Mitigation: The Basics

BPR

2.5.2

(a)  ‘Relevant business property’
The property must, wherever in the world it is situated, be (IHTA 1984 s105):

•  a business, or an interest in a business, which must be carried on with a view to profit;
•  unquoted securities which confer control, either by themselves or with any other unquoted securities or shares;
•  any unquoted shares;
•  a controlling holding of quoted shares;
•  land or buildings, machinery or plant used in a business by a company controlled by the deceased, or by a partnership of which he was a partner; or
•  land or buildings, machinery or plant owned by trustees and used in a business where the deceased had an estate life interest.

(b) Period of ownership
The taxpayer must have owned the relevant busness property for at least two years, subject to relieving provisions for replacement property and for property inherited on the death of a spouse/civil partner (IHTA 1984 ss106, 107 and 108).

(c)  Rate of relief
100% relief will be given for the first three categories above, otherwise 50% (IHTA 1984 s104). Shares in AIM companies are treated as unquoted companies.

(d)  Type of business
The business must not be wholly or mainly an investment or a dealing business (IHTA 1984 s105(3)). Generally speaking, BPR is given only to trading businesses. Accordingly, a business of owning property which is let residentially or commercially will generally not attract BPR. Some businesses will be ‘mixed’, comprising a number of different elements. Relief will be given only if the trading side predominates.

(e)  Excepted assets
There may be some assets in a qualifying business which constitute ‘excepted assets’ (IHTA 1984 s112). These will be excluded from relief where broadly not used in the business nor required for future business use.  The proprietor of a business cannot simply ‘park’ spare cash, surplus to business requirements, in the business and necessarily expect to get BPR on all the cash: that said, however, see 6.2.6(d).