What is Business Propery Relief (BPR)?
BPR can provide a valuable relief from inheritance tax. Investments that qualify for BPR can be passed on free from IHT upon the death of the investor, provided the shares have been owned for at least two years at that time.
Not every investment or interest in a business will qualify for BPR, but BPR is typically available for:
Shares in an unquoted qualifying company, even a minority holding
Shares in a qualifying company listed on the Alternative Investment Market (AIM),
An unincorporated qualifying trading business, or an interest in one – e.g. a partnership.
The Government’s decision in 2013 to allow AIM-listed shares to be held within ISAs means that investors can now hold BPR-qualifying shares within a tax-efficient ISA wrapper.
There are three key benefits of a BPR-qualifying investment:
Making gifts or settling assets into trust usually takes seven years to become completely free from IHT. An investment in a BPR-qualifying company can be passed to beneficiaries free of IHT provided it has been held for at least two years.
Owning BPR-qualifying shares allows your wealth to stay in your name.
BPR-qualifying investments do not use the nil-rate band. This means you can plan for your nil-rate band allowance to reduce the inheritance tax charge on less liquid assets, such as your home, which are otherwise difficult to place outside of the estate for tax purposes.
There are risks to consider. Tax rules could change in the future and the value of tax reliefs will depend on your personal circumstances. There is no guarantee that companies that qualify today will remain BPR qualifying in the future. Those qualifying must not be listed on a main stock exchange. Companies could fall in value, and you may get back less than you invest.
Estate planning should be done holistically and advice sought before making decisions that affect your family’s future.
Call 0117 363 6212 or email office@haroldstephens.co.uk to book your complimentary financial review today.