That’s a relief! Tax relief on your business upon death

Year Published: 2015

When someone is setting up a new business, it’s an exciting venture with the prospects of making money and providing for your family. Recently, there have been lots of tax provisions to help out businesses but one that has been around for some time and gets forgotten about is Business Property Relief (BPR). If your business assets satisfy the relevant criteria, it could benefit your family at a time they really need it.

What is BPR?

BPR applies to qualifying business assets (which means business interests or assets in an active trading business) which have been owned by the deceased for a minimum of two years before death. Interests or assets in an investment business will not receive the relief. For example, if you were to purchase a portfolio of properties, place them in a company and rent them out.

It can sometimes be unclear whether the relief will apply as a business could consist of a mix of activities some of which are investment and some of which are trading. Also any money held within a business which is not required for the running of the business will not benefit from the relief.

What is the relief?

The relief is given at either 100% or 50%. The 100% rate usually applies to an interest in a business, unquoted securities giving control or unquoted shares whereas the 50% rate applies to land used in a business. For example, if BPR was to be given at 50% of the value of the asset, the business premises would have to be owned by a member of a partnership or the principal shareholder of a company as individuals. To receive the relief at 100% the asset or interest would have to be owned by the business but how the assets are owned should be given some careful thought as they carry different risks and depend on whether it is a majority or minority holding.

Making use of BPR

For a business person who is married and ultimately wishes to benefit their children or other heirs, the reliefs can best be exploited by not leaving the qualifying business assets to their spouse (especially if there is a real prospect of the spouse disposing of them during his or her lifetime and so losing the reliefs). The best way to use the relief would be to incorporate some planning within your will depending on your specific circumstances. In conjunction with your will, you should also review any relevant Shareholders’ Agreement or Partnership Agreement as the provisions within those documents may also impact the application of BPR.

For more information on BPR or any other wills and wealth planning matters, please contact our Wills & Wealth Planning team on 01625 442148.

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