Business property relief is a very valuable relief that allows certain business assets to be passed on free of inheritance tax. Other business assets qualify for 50% reduction.
On death, in the absence of business property relief, a business will be chargeable to inheritance tax. Where business property relief applies, the value of the business assets are still included in the estate, but they are reduced by the amount of the relief, which is given at either 100% or 50% of the value of the assets transferred. The extent of the relief depends on the nature of the business asset.
100% relief
The following assets constitute relevant business property, which qualifies for 100% relief:
For business property relief purposes, shares which are quoted on the AIM, OFEX, EU Junior or the NASDAQ Europe markets are treated as unquoted.
50% relief
Business property relief is also given at 50% in respect of the following
Exclusions
Certain exclusions apply which prevent business assets falling within the above from being relevant business property qualifying for business property relief. Relief is denied if:
Land and buildings, machinery and plant owned by the transferor are only relevant business property if immediately before the transfer the transferor’s interest in or shares and securities of the company are also relevant business property.
Two-year rule
In addition, to qualify for business property relief, assets must have been used for the purposes of the business for a continuous period of two years prior to the transfer (although replacement assets may qualify).
Need to know
Business assets only qualify for business property relief is they are relevant business property and all other conditions for relief are met.
If you need further advice on Business Property Relief or information on any other tax related matters please get in touch with us at Inform.
Read earlier tax blogs:
Qualifying for Entrepreneur's relief