If you own a business, or interest in the business or shares in an unlisted company you will be entitled to 100% BPR relief.
Getting a 100% BPR relief will mean that this particular qualifying business, interest in the business will not become part of your estate on which you will have to pay Inheritance tax at the time of your death.
Inheritance tax is paid on everything you own at the time of your death if the value of your estate is above £325 000 unless you leave all your wealth to your spouse, charity or community amateur sports club.
There are certain reliefs available which will reduce the inheritance tax and the business property relief is one of them. It will either reduce the inheritance tax on the qualifying asset by 100% or 50% depending on the circumstances which are discussed below.
You will get 100% relief if:
- If you have a business or an interest in the business
- Shares in an unlisted company
You will get 50% relief if :
- You have more than 50% shares with controlling rights in a listed company.
- On any land or building owned by the deceased and used by the business they controlled or were a partner.
- Land, buildings or machinery used in a business and held in a trust that it has a right to benefit from.
Conditions:
- BPR is only available if the deceased owned the business for 2 or more years
- The business should not deal mainly in the stocks, securities, land or building. It should also not be in making or holding investments. Buy to let properties do not qualify for BPR.
- The business should not be a Not for profit Organization.
- The business is a going concern and is not being wound up or sold.
Inheritance tax Planning:
If you want to manage your assets so as to reduce your inheritance tax you should consider investing your wealth in a business which qualifies for an exemption from Inheritance tax. This might be better than gifting your wealth in your lifetime in 2 ways:
- You still own your wealth and you can enjoy the financial benefits from the business you have invested in.
- You don't have to wait for 7 years for it to qualify for the relief. If you inherited the qualifying property from your spouse who passed it to you without keeping it for 2 years, then your ownership of that qualifying property can also be added to the 2 year period.
However, this also means that you are investing in a high risk investment and your capital might be at a risk.
BPR can be claimed by the executor of your will or the administrator of your estate. HMRC will assess the qualifying assets for the BPR relief after the appropriate forms are filled.
Estate planning can involve lots of rules which need to be considered, different reliefs are available depending on your personal circumstances.You might want to consider hiring an accountant who can help you with this. We at Taxaccolega, have a team of accountants who can help you with estate planning, setting up trusts, calculate and pay inheritance tax bills. Just call us at 020 8127 0728 or leave us a message here and we will get back to you, you can also email us at
info@taxaccolega.co.uk
Source: https://www.gov.uk/business-relief-inheritance-tax