What is business property relief?

Currently, Inheritance Tax is paid at 40% on a deceased’s estate which exceeds the Tax allowances. Or if you leave 10% of your estate to charity, then Inheritance Tax will be paid at 36%. There are various Tax allowances which can be claimed such as spouse exemption, small gift allowances, a Nil Rate Band allowance, a Residential Nil Rate Band allowance, charity exemption, Agricultural Property Relief and Business Property Relief etc.

Business Property Relief is an invaluable relief from Inheritance Tax for many business owners at either a rate of 50% or 100% on some business assets.

How does Business Property Relief work?

At present, if you have owned a business asset for at least two years, you can claim a full 100% Business Property Relief on shares in an unlisted company and a business or interest in a business or 50% from the following:

• On land, buildings or machinery used in the business and held in a trust that it has to benefit from 
• On land, buildings or machinery owned by the deceased and used in a business that they were a partner in or controlled; and
• Shares controlling more than 50% of the voting rights in a listed company

By claiming Business Property Relief on assets which qualify, then this will reduce an estate’s potential Inheritance Tax bill.

How to claim Business Property relief?

Business Property Relief can be claimed by your executors appointed under your will. When they submit an ‘IHT400’ to HMRC which details the deceased’s assets and liabilities, as at the deceased’s date of death, the executor will have to list any Tax allowances that can be claimed.

Business succession planning – do not leave it too late!

Family businesses are often being passed down by generations. There is a lot of sentiment and emotion that goes with these types of transactions. The transition of a family business from one generation to the next must go smoothly for the sake of the business continuing and the family legacy that comes with the business.

Succession planning is often overlooked or left until a late stage. It may mean that a deceased’s estate pays more Inheritance Tax than needed because the deceased did not plan ahead for the future.

Business succession planning is crucial. It ensures that you have a formal agreement in place for your family business in the event of an expected accident. By ensuring that you consider succession planning in your lifetime, as early as possible, it means that you can utilise the Tax allowance and take comfort in your loved ones being well provided for.

If you own a business and would like advice on Business Property Relief or estate planning, please contact one of our specialists.  I am based in our Colchester office and can be contacted on 01206 217609 or [email protected].