Inheritance Tax – Business Property Relief and Agricultural Property Relief

Inheritance Tax is charged on the value of assets and two important reliefs are available in the form of Business Property Relief (BPR) and Agricultural Property Relief (APR) which provide an exemption at either 100% or 50% on qualifying assets.

Business Property Relief (BPR)

100% relief is available on:

• Business or an interest in a business
• Shares in an unquoted company

50% relief on

• Assets used in a partnership you control.
• Assets let to a company you control.

It should be noted:

There is a minimum holding period of two years for the asset (unless it qualifies as replacement property)

For a business, partnership or company, it has to undertake mainly trading activities to qualify for BPR.

Agricultural Property Relief (APR)

APR is limited to the agricultural value of the following assets. BPR may be available on the asset if APR fails.

• Farmland
• Farmhouses
• Farm cottages
• Woodlands managed on a commercial basis

To qualify, the property has to be used for agricultural purposes for 2 years by the individual or 7 years if occupied for the purposes of agriculture by someone else.

Risk

A risk for many individuals will be that they have assets which are either covered by BPR or APR and which they then sell and turn into cash. They will then have converted assets which may be fully covered by BPR and APR and not subject to Inheritance Tax into assets which will be subject to Inheritance Tax at 40%.

It is possible to successfully plan to mitigate Inheritance Tax exposure and we would recommend individuals’ consider their potential Estates and the taxation liabilities which could arise. Get in touch with our expert team if you would like any further assistance.