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Home » Latest News » Business Property Relief: Planning for the future

Business Property Relief: Planning for the future

Using BPR to reduce IHT

Although it’s not a subject anyone wants to dwell on for too long, we know that, like most people, you imagine that your family will be financially secure and well provided for once you’ve passed on.

According to the HMRC Inheritance Tax Statistics 2012-13 Report, between 2014 and 2015 the British Government received around £3.8 billion in Inheritance Tax (IHT) receipts, a figure that increased by 11.9% on the period before. The report goes on to state that properties, household savings and securities made up the bulk of this figure.

Between 2014 and 2015 the British Government received around £3.8 billion in Inheritance Tax (IHT) receipts

We understand that you’ve worked hard to accrue assets and want to hand them down to your loved ones. In order to support their futures, you want those assets to remain intact, with as little lost to Inheritance Tax as possible.

Of course, we all know the famous Benjamin Franklin quote: “In this world, nothing can be said to be certain except death and taxes.” While we agree with him up to a point, there are ways to reduce your family’s potential IHT bill.

For instance, you could give assets as gifts, but this has to happen at least seven years before your death in order to be exempt from IHT. Obviously, that requires a lot of planning and is less than practical if you need to access your assets in those seven years.

Introducing Business Property Relief

A viable solution is Business Property Relief (BPR). This allows either 50% or 100% tax relief on investments made in qualifying businesses more than two years before death.

Investments in a business, including shares in an unlisted company (which appears on the Alternative Investments Market), all qualify for 100% BPR. There are also a number of ways to qualify for 50% BPR. For instance, if the deceased was a partner or in control of a business and also owned land, buildings or machinery used by the company, their family could claim 50% BPR.

Business property and assets can also be given away as gifts to loved ones and still be eligible for BPR, providing that they have been held for more than two years before death, and are owned by the receiver until the death of the giver. That means that the receiver cannot claim BPR on assets they have sold prior to the death of the giver. However, these gifts can be replaced by other assets of equal value if needed by the business.

Things to consider

As with all things in life, there are lots of factors to consider when looking into Inheritance Tax planning and BPR.

There are exceptions and certain types of organisation and property are not eligible for BPR. Property lettings companies, for example, are exempt. Changes to business structure may also mean that they no longer qualify for relief.

You should also bear in mind that your loved ones may have to pay Capital Gains or Income Tax when they come to sell any asset or business interest if its value has increased since it was first bought too.

It is worth speaking to a professional financial planner to discuss the options available and any caveats and catches that might invalidate planning, so your family doesn’t end up with a huge bill.

Alan Boswell Financial Planners can help you manage your assets and plan for the future. We’ll take a look at your situation and your aims for the future to help you find the right plan for your loved ones. Call 01603 967967 to book an appointment.

The value of tax relief depends on your individual circumstances. Tax laws can change.

This article originally appeared in the autumn 2016 edition of Telegraph magazine. Download the magazine now.

Photo credit: Sergey Nivens, Fotolia

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