Who We Help with Business Property Relief

havenifa

havenifa


Posted on: 11th February 2022

If you have only just recently been clued into the prospect of business property relief (BPR) as one of the ways to relieve tax, you may be thinking it is something new – when in fact it has been a longstanding inheritance tax relief. It can be extremely useful as part of your estate planning, and it is something that independent financial advisers are skilled to help.

What is BPR?

Once you have held a BPR-qualifying investment for two years, you can continue to hold the investment until death, and it will be eligible to be passed on free from inheritance tax. Typically, it can take seven years for gifts to become fully exempt from tax, so BPR is very beneficial for very elderly clients who have not committed to much estate planning or those who are in ill health.

However, this does not only benefit those in an elderly or ill health situation. It can stand to benefit other scenarios also. What needs to be made clear foremost is that this type of inheritance tax planning puts capital at risk, as the value of BPR-qualifying investments – as well as income from it – can fall as much as it can rise on occasion – meaning you could potentially not get back the full amount of investment you put in.

Discussing with an independent financial adviser will make you aware of any risk associated with this form of estate planning route.

Types of Clients Who Stand to Benefit

BPR is suitable for several individuals, with a key advantage being that a BPR-qualifying investment is that it stays in the client’s name, meaning if circumstances change and they need to access some or all of the money, they can request a withdrawal subject to available liquidity.

Clients who own a business or its activities also meet the qualifying criteria for business property relief, meaning they can pass on shares in the business free from inheritance tax following their death. If clients sell the business, proceeds would be prone to inheritance tax when they die. However, if some or all of the proceeds were used to buy shares in another BPR-qualifying business within 3 years, shares would be zero-rated for inheritance tax from the first day.

Risks

As we mentioned above, BPR Qualifying investments do carry certain risks towards the client’s capital. Clients also need to be made aware that individual circumstances and tax rules can change at any time in the future.

Tax relief greatly depends on companies that are invested in retaining their BPR-qualifying status. This is where keeping in close contact with an independent financial adviser helps to keep you in the know and on the right track when it comes to riskier investments such as BPR.

Contact the team at Haven IFA today for up to the minute investment advice Manchester and more information on how business property relief can help with reducing inheritance tax.

Posted in Tax