Business Property Relief
If you own a business or a have shares in a business, this would normally form part of your Estate as far as IHT is concerned. However, Business Relief may enable an individual to leave some or all of the business free of IHT, either during their lifetime or after death under the terms of their will.
Qualifying Business Relief Assets
Business Relief assets could include a business or a shares in an unlisted (shares not listed on the stock exchange) Company, including AIM shares or securities owned by you that give you control of a company listed on a recognised stock exchange. Also qualifying assets could include land, buildings, plant or machinery, owned by you and used primarily in the business with the proviso that you have owned the business asset for at least two years before the business was passed on.
IHT Rates for Business Property
For qualifying Business Relief assets, IHT relief is given at either 50% or 100%. This is dependent on the type of Business asset.
Under current HMRC ruling 100% relief is available for a business or interest in a business, or a holding of shares in an unlisted company. However, for certain business assets only 50% relief is available.
If you have, or feel you have assets that may qualify for Business Relief you should gain clarification from your accountant.
Lifetime Gifts of Qualifying Business Property
You may gift assets that qualify for business property relief without jeopardising the qualifying status.
Should you gift business property or assets in your lifetime, in order for the asset to retain it’s qualifying status, the Donee must retain the Business assets as a going concern until your death in order to keep the relief. Business assets may be replaced by the Donee as long as their replacements are used within the business.
Off the Shelf Investments that qualify for Business Property Relief
If you don't happen to be fortunate enough to own a qualifying Business or Business Assets (as many of us don't), various investment houses offer investments that are structured in such a way that they actually qualify for Business Property relief at a rate of 100% as long as you hold that investment for a period of at least two years.
As such, these qualifying investments, such as Enterprise Investment Schemes (EIS) and Estate Planning Schemes can be used to great effect in reducing an Estate's liability to IHT.