What is BPR?
BPR is a relief from inheritance tax (IHT). The primary purpose of BPR is to prevent the break up of businesses upon death due to the IHT charge which would ordinarily apply if the relief was not available. This allows family businesses to pass down through generations with little disruption.
If certain conditions (as set out below) are met, BPR will reduce the value of transfers for IHT purposes of “relevant business property” by either 50% or 100% depending on the type of asset. Therefore it can prove a very useful tool for IHT planning.
Broadly speaking, the relevant business property must have been owned by the transferor for two years prior to the transfer (the rules are relaxed for transfers between spouses upon death, quick transfers and replacement property).
Relevant Business Property
Below is a table listing the main types of relevant business property and the rate of relief that will apply.
|Type of property||Rate of BPR|
|A business trading as a sole-trader or a share in a partnership||100%|
|Unquoted company shares (including AIM shares)||100%|
|Unquoted company securities (debenture stock or loan notes) that give control||100%|
|Quoted company shares or securities that give control||50%|
|Land, buildings, machinery or plant used wholly or mainly for the purposes of a business carried on by a company in which the transferor has control or by a partnership in which the transferor was a partner||50%|
Generally speaking, a business will not qualify for BPR if it is wholly and mainly involved in dealing in securities, shares, land, buildings or making and holding investments. BPR is also not available where there is a binding contract for sale at the date of the transfer or if the business is being wound up or in liquidation.
The application of BPR and its relationship with other reliefs and exemptions (including the new residence nil rate band) can be complex. If you have any questions about the application of BPR and how you it may affect your estate please contact Raveet Phull, Nicole Marmor or our Probate department on 01727 832830.