tax planning

BPR & IHT

havenifa

havenifa


Posted on: 10th January 2022

A lot of hardship has been created due to Covid, and a lot of uncertainty about the variants continuing to play an unfortunate wave of disruption on the economy and businesses as a whole. Whatever happens from this point forwards, we can all expect taxes to rise in all areas. Corporation tax is set to rise to 25% in 2023, Capital Gains tax is sure to see a rise shortly and IHT (Inheritance Tax) will most likely end up reviewed. Whilst all this is starting to take shape, it is important to focus on remaining tax planning opportunities and take advantage whilst they are still possible.

One effective strategy for inheritance tax relief is that of Business Property Relief (BPR), which is available and mostly overlooked as an effective option, but one of the most efficient ways to reduce tax.

Origins

What is BPR? Business Property Relief was introduced back in the 1970s as a way for helping business owners transfer business assets over the generations. It has become progressively generous in the years since.

There is nothing worse than having to pay inheritance tax when you don’t have to, and BPR provides a high level of tax relief. Within this, taxpayers can obtain between 50% and 100% tax relief on transfers for qualifying business assets. The definition of what qualifies has been expanded over the years.

Property investment companies and those dealing in stocks and shares, or investments are not typically eligible, owning property through limited companies that create values in shares of the company also don’t qualify – unless the company trades from the property, or another qualifying business undertaken by that company is of substantial size.

Effective

When you gift non-business assets away, you must outlive the date of giving the gift by 7 years for it to qualify as a lifetime gift outside of your estate for tax purposes.

If your business assets have been held for just two years, they will fall outside of your estate. This is where Business Property Relief becomes extremely helpful towards those individuals who are not able to take advantage of the 7-year rule due to declining health or terminal illness.

Owning certain types of unquoted shares can also qualify for BPR, as well as those shares being able to be stored in an ISA for the benefit of additional tax advantages. AIM-listed company shares qualify for the relief, as well as approved VCTs, EIS and SEIS company shares – but FTSE 100 shares are not covered.

Talking with Your Adviser

You don’t have to be in the position of a majority shareholder or central business owner to access BPR – which is why it provides versatility for tax planning.

To take full advantage of BPR whilst it is available, a conversation with your financial adviser should be your first port of call. Contact the team at Haven IFA today to discuss Inheritance Tax Relief, tax planning and accessing business property relief northwest.

Posted in Tax