Business Property Relief (BPR) is a very advantageous relief for Inheritance Tax (IHT) purposes because where BPR applies, the assets concerned are transferred as if they are of zero value, thus attracting 100 per cent relief from IHT.
Needless to say, there are quite strict rules regarding what is and what is not ‘qualifying business property’ for BPR. Also, there is a rule which stipulates that for BPR to apply, the business concerned (but not necessarily the assets transferred) must have been owned for at least two years.
In a case heard by the Special Commissioners of Taxes, who hear cases involving difficult or complex applications of tax law, the question was raised as to whether BPR could be claimed where there was a reduction in value of the relevant business property, without the business itself or an interest in the business being transferred. In the case in question, a transfer was made in favour of a family trust of farmland and two cottages that were owned by the business but not used for business purposes. The Special Commissioners could see no reason why BPR should be denied in the circumstances.
In another case, the question was whether the sub-letting of fields was a business for the purposes of BPR. The Special Commissioners decided in this instance that the arrangement did not qualify because the business was primarily concerned with the holding of investments, which is not a ‘qualifying business purpose’.
These cases show the importance of considering carefully the detailed provisions of tax law when considering the transfer of business assets. The rules for qualifying for BPR are complex, but not particularly onerous. We can advise on all aspects of IHT planning and preservation of family wealth.