Inheritance Tax - Business Property Relief

Question 1

BPR?

Answer 1

BPR is an inheritance tax relief available on
- lifetime transfers (before other exemptions)
- transfers on death

Question 2

which stage is BPR in the computation for IHT?

Answer 2

stage 1 - calculating the chargeable amount

transfer xxx
Less: BPR (xxx)
Less: marriage exemption (xxx)
less: annual exemption (xxx)
equals: chargeable amount

Question 3

BPR is available if which conditions are met?

Answer 3

• relevant business property is transferred
• the property has been owned for the qualifying ownership period
• the transfer is not part of a contractual obligation to sell

Question 4

for a lifetime transfer to transfer to qualify for BPR at death…

Answer 4

• transferee must still own the business property at death
• property must still be relevant property at date of death

Question 5

where a transferor makes a transfer of relevant business property…

Answer 5

relief applies to reduce the value of the transfer by either 100% or 50%

Question 6

can relevant business property be anywhere in the world?

Answer 6

yes

Question 7

what gets 100% BPR relief?

Answer 7

• an unincorporated trading business
• an interest in an unincorporated trading business
• shares in an unquoted company (including shares quoted on AIM)

Question 8

what gets 50% BPR relief?

Answer 8

• shares in a quoted trading company (controlling holding)
• land, buildings, plant & machinery owned by the transferor and used for business purposes by a trading company of which the transferor had control immediately before the transfer

Question 9

ownership period?

Answer 9

to qualify for BPR, property transferred must have been owned for TWO YEARS before the transfer

if there are successive transfers of the property, one of which was on death and the first transfer qualified for BPR, the TWO YEAR requirement on second transfer is ignored

Question 10

exceptions to the TWO YEAR rule for BPR?

Answer 10

• when inherited by spouse, ownership by deceased spouse is counted as ownership by transferee
• where property replaced other business property, transferor must’ve owned the assets for a combined period of at least 2 years within the 5 years prior to transfer

Question 11

is BPR available on excepted assets?

Answer 11

no

Question 12

excepted assets?

Answer 12

assets which haven’t been used wholly for business purpose throughout the 2yrs prior to transfer

Question 13

formula for excepted assets?

Answer 13

value of transfer x (net assets - excepted assets) / net assets

Question 14

how to calculate the value of any asset qualifying for BPR?

Answer 14

asset needs to be reduced for any liability taken out to acquire, maintain or enhance the value of the relevant asset

BPR only applies to the net value of the asset (after deduction of attributable liability)