What is Business Property Relief and How Can I Claim This?

Business Property Relief (BPR) is a relief which can be claimed in respect of inheritance tax and reduces the value of the deceased’s taxable estate by the amount attached to the relevant business property. It is merely a relief rather than an exemption and is governed by the Inheritance Tax Act 1984, namely sections 103 to 114.

What type of property is eligible?

Section 105 of the Inheritance Tax Act 1984 sets out the types of property eligible for BPR, including:-

1. a) property consisting of a business or interest in a business;
2. b) certain shares which are unquoted;
3. c) certain shares which are quoted; and
4. d) any land, buildings, machinery or plant owned by the individual which was used for the purpose of the business.

Any property which is “wholly or mainly” concerned with holding investments is not eligible under section 105(3).

How much BPR can I claim?

Section 104 of the Inheritance Tax Act 1984  sets out the relief an individual’s estate might be eligible for, depending on the type of property in question.

If the business property lies within Section 105(1)(a-b) the eligible relief is 100%. If the property falls outside that scope, then the relief is reduced to 50%.

How do I work out the value of the Business Property?

Section 110 of the Inheritance Tax Act 1984 addresses how the business is valued.

The overall value of the business is to be taken as its net value. This is calculated by taking the total amount of assets used in the business minus the total amount of liabilities incurred.

How can I claim BPR?

The deceased must have owned the property for at least two years prior to death to be considered ‘relevant property’ (Section 106 of the Inheritance Tax Act 1984). However, an exception to this rule is if the spouse is due to inherit any business property under the deceased’s will or through the rules of intestacy.

To claim BPR, you or your solicitor will need to file a Schedule IHT413 when submitting the relevant Inheritance Tax Form IHT400, and we would also recommend that you may wish to take specialist financial as well as legal advice when considering estate planning and whether any assets you own would be eligible for this relief.

Frequently Asked Questions

What is Business Property Relief (BPR)?

Business Property Relief is an inheritance tax relief that can reduce the value of qualifying business assets in an estate, potentially by up to 100%.

Who can benefit from BPR?

BPR benefits the estate of a deceased individual by lowering the inheritance tax liability on eligible business assets passed to beneficiaries.

What types of businesses qualify for BPR?

Qualifying businesses typically include trading businesses, partnerships, and shares in unquoted companies, provided they are not mainly involved in investment activities.

Does BPR apply to all shares?

No, it generally applies to unquoted shares and certain quoted shares, but not all publicly traded shares qualify.

What assets are excluded from BPR?

Assets mainly used for investment purposes, such as property rental businesses are usually excluded from relief.

Examples

Example A

Family-owned trading business (100% relief)

John owned 100% of a manufacturing business for over 10 years before passing away. The business is actively trading and valued at £1 million. Because it qualifies as a trading business under the Inheritance Tax Act 1984, and John held it for more than two years, his estate can claim 100% BPR. As a result, the full £1 million value is relieved from inheritance tax.

Example B

Investment property business (no relief)

Hannah owned a portfolio of rental properties generating income. While it is technically a business, it is classified as mainly investment based. Because BPR excludes businesses “wholly or mainly” dealing in investments, her estate cannot claim BPR, and the full value remains subject to inheritance tax.