Posted on: 17th December 2021
BPR stands for Business Property Relief and is not something that has just appeared as a benefit, it has been around in some form since it was introduced in the 1976 Finance Act – although it has come a long way since. So, what is Business Property Relief?
In its first design, it was to ensure that a family-owned business could survive as a trading entity following the death of the owner, without the need to sell or break up the business to pay an inheritance tax liability. As the year’s progressed, governments realised that encouraging people to invest in trading businesses regardless of them running the business themselves was extremely valuable.
As Business Property Relief is now a well-established relief for over 40 years, it should be noted that the value of investments can go up or down and there is a potential risk that any investors may not get back what they put in. Tax rules could also change in the future and individual tax relief value can depend on circumstances.
Which Businesses Qualify?
Whilst an available source of relief, not everyor interest in a business will qualify for BPR.
BPR does have some qualifying factors such as those with shares in an unquoted qualifying company or minority holding, those with shares in a qualifying company listed on the Alternative Investment Market (AIM), and those with an unincorporated qualifying trading business or having an interest in one – such as a partnership.
In 2013, the UK Government made a decision that allowed AIM-listed shares to be held within individual savings accounts (ISAs), which meant that investors were able to hold BPR-qualifying shares in an ISA wrapper that was tax efficient.
Categories That Fit
Investing in shares of BPR-qualifying companies stand to be very beneficial for several groups that slot into certain categories.
Giving away money during your lifetime may not be an option you feel comfortable with, although it will reduce the value of your estate. With BPR investments, all the shares are held in your name which means your wealth you can keep hold of.
If you look to have the inheritance grow that you plan to leave behind, investing in BPR-qualifying companies allows you to potentially increase in value. However, as with any, there is always the potential that you could lose some or all of your money as there are no guarantees.
Some people are averse to traditional estate planning strategies such as gift making and putting a trust together due to their 7-year stretch to becoming fully exempt from inheritance tax. With BPR qualifying investments, the shares become 100% exempt from inheritance tax after a two year holding period, as long as shares are still held at the time of death.