It is a valuable inheritance tax (IHT) relief, allowing certain types of business assets to be passed on 100% IHT-free. There is also a 50% rate of relief for other eligible business assets that do not qualify for the 100% rate.
However, as with all reliefs, its availability is contingent on certain conditions being met, as only the ‘right’ type of business assets will qualify for the relief.
Although the relief was introduced to enable family businesses to be passed on IHT free, the scope of the relief has been widened since it was first introduced.
The ‘right’ property
BPR is only available in respect of ‘relevant business property’. To qualify as relevant business property, the property transferred must be one of the following:
- Property consisting of a business or an interest in a business;
- Securities of a company which are unquoted and which, either alone or with other unquoted securities owned by the transferor, gave the transferor control of the company immediately before the transfer;
- Any unquoted shares in a company;
- Shares or securities in a company which are quoted and which, either alone or with other such shares and securities owned by the transferor, gave the transferor control of the company immediately before the transfer;
- Any land or building, machinery or plant which immediately before the transfer was used wholly or mainly for the purposes of a business carried on by a company of which the transferor had control, or by a partnership in which the transferor was then a partner; or
- Any land or building, machinery or plant which immediately before the transfer was used wholly or mainly for the purposes of a business carried on by the transferor and was settled property in which the transferor was then beneficially entitled to an interest in possession.
To benefit from the relief, the property must generally have been used by the transferor throughout the two years immediately preceding the transfer of value.
Property that does not pass this minimum period of ownership test is generally not relevant business property.