inheritance tax planning advice

What is BPR?



Posted on: 26th November 2021

BPR stands for Business Property Relief and it is a very valuable form of tax relief for business owners and investors who are in need of inheritance tax planning advice. This tax relief allows for you to claim BPR Inheritance Tax (IHT) relief on business assets that you own that includes shares in qualifying businesses.

It is an area that many people are not aware of yet it can be of great benefit to your inheritance tax planning.

How Does BPR Work?

If you are either a business owner or have an interest in a business – BPR inheritance tax relief may be applicable for your estate. As you may know, Inheritance Tax (IHT) is applied to your estate after you have passed away. This encompasses everything you own.

The current nil rate band (NRB) for every person in the UK is £325,000, which is your IHT allowance. If your estate value is above this figure, IHT will apply to the excess, and your beneficiaries will be required to pay on it.

Not everybody instantly qualifies for this BPR tax relief, as you will have to have owned a business or business assets for a term of no less than two years before your death. If you were to pass away shortly after acquiring an asset, your estate will not be eligible for the relief.

There is an exception though if you inherit the asset through your spouse who has owned it for less than two years. In this instance, the period of ownership is added to that of your late spouse and if that exceeds two years combined, you are eligible for Business Property Relief northwest.

How Much Relief is Available

Relief from Inheritance Tax is either at 100% or 50% depending on the type of business assets you own. Also, not every business or interest in a business does qualify for BPR.

Traditionally, BPR applies to a qualifying trading business or an interest in one, shares in unlisted qualifying companies (including minority holdings) and shares in qualifying companies listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

If the business mainly deals in the areas of securities, stocks, land, or buildings or making or holding of investments – it is not eligible for BPR. Buy-to-let businesses are treated as investment businesses which also excludes buy-to-let investors from being eligible.

Tax Planning

Even if you don’t own your own business, BPR can still play a firm hand in your Inheritance Tax planning. As a way of reducing your IHT bill, you can effectively invest in a qualifying business to save on tax.

As an IHT strategy to consider, BPR qualifying investments can provide greater control over your money – Unlike gifting, you retain ownership of your money in this scenario. If you don’t like the idea of giving large sums of your money away in your lifetime to reduce your liability, this option could be the best move.

There are risks involved with doing things without the proper guidance from independent financial advisers Cheshire – including your capital being at a certain level of risk. For effective inheritance tax planning advice, contact the team at Haven IFA today.

Posted in Tax