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Higher risk investments

Business Property Relief

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BUSINESS PROPERTY RELIEF SCHEMES (BPR) INVEST IN ASSETS THAT ARE HIGH RISK AND CAN BE DIFFICULT TO SELL SUCH AS SHARES IN UNLISTED COMPANIES.

THE VALUE OF THE INVESTMENT AND THE INCOME FROM IT CAN FALL AS WELL AS RISE AND INVESTORS MAY NOT GET BACK WHAT THEY ORIGINALLY INVESTED, EVEN TAKING INTO ACCOUNT THE TAX BENEFITS.

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If you invest in the shares of a trading company, your investment will benefit from 100% relief from inheritance tax, as long as you hold the shares for at least two years and still hold them when you die. The relief only applies to unlisted shares, or shares quoted on junior stock markets like the Alternative Investment Market (AIM).

Not all companies will qualify for Business Property Relief (BPR). For the relief to apply, a key requirement is that a company must be trading. This means, for example, that it can’t simply hold cash, rental property, or other assets that are considered to be investments. Instead, a company needs to be carrying on an active business with the intention of making a profit.

The qualification of an investment for BPR is considered by HMRC on a case-by-case basis under the law that applies when you die. Investments that qualify for BPR (and meet the two-year holding criteria) can be passed to your beneficiaries free of inheritance tax. To obtain BPR the executors of your estate will need to complete a copy of the probate return form IHT 412 and return this to HMRC.