ways to reduce inheritance tax

Can an IFA Guide Me on Business Property Relief?



Posted on: 18th February 2022

Business Property Relief (BPR) is a term you may have heard discussed as a valuable investment opportunity to save on areas of tax, but you may not be aware if it benefits you in ways to reduce inheritance tax.

This is an area where a financial adviser really can help you see the value of this class of investment. BPR schemes open up an opportunity to invest in BPR-Qualifying companies and, with shares held in your name, you can keep hold of your wealth and reach a level where they can be 100% IHT-free after a 2 year holding period before your time of death.

The Business That Qualify

If you take the route of investing in the shares of a BPR-qualifying company, your investment will feel the benefit of 50% to 100% relief from inheritance tax as long as you hold those shares for a minimum of 2 years and are still holding them at the time of your death.

This relief applies to unlisted shares or shares that are quoted on junior stock markets like the Alternative Investment Market (AIM). The key requirement for companies to qualify is that it must be trading – not simply holding cash, rental property or assets that are considered as investments.

The qualifying company must be carrying an active business with making a profit as its intention.

The qualification of investment for BPR is considered by HMRC on a case-by-case basis under the law that applies after your death. The investments meeting the two-year holding criteria for BPR can then be passed on to your chosen beneficiaries completely free of inheritance tax.

How an Adviser Can Help with Estate Planning

Many people are not aware of BPR as an option or even if they can benefit from it. Unlike planning strategies such as lifetime gifting, BPR provides a means to not lose control of your assets and an ability to be able to gain access to them in instances such as requiring them for care expenses.

Talking with an educated and independent financial adviser as part of a conversation about estate planning opens up positive avenues around doing inheritance tax planning whilst keeping assets in your name.

To most clients, it can feel like a natural extension to all the other investments they are advised on – and, as with those investments, you will need to understand how these investments fully work and what you stand to gain. This is where conversations with your financial adviser on estate planning will truly benefit in avoiding and mitigating any IHT problems that may be on the horizon.

For ways to ways to reduce inheritance tax, contact our advisers at Haven IFA today to discuss the potential of business property relief towards your estate planning, investment advice Manchester and inheritance tax relief.

Posted in Tax