Introduction
I've been looking at, "Business Relief for Inheritance Tax", also known on most web sites as "Business Property Relief" (BPR). In case you didn't know, after two years BPR gives you 100% Inheritance Tax (IHT) relief for shares in an unlisted company, which includes many AIM companies. I want to identify a few simple screening rules for finding BPR shares, which when added to one my existing favourite screens would provide a quick shortlist for a BPR portfolio.
After several minutes of extensive research I've found several web sites that discuss this topic. A lot fell short of my expectations merely stating that is was very difficult to build a BPR portfolio, and that you should subscribe to their discretionary portfolio management service. No thanks.
Some of the more useful research finds
The HMRC page includes the following rules:
- You can get 100% Business Relief on shares in an unlisted company
- You can only get relief if the deceased owned the business or asset for at least 2 years before they died.
- You can’t claim Business Relief if the company:
- mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments
- is a not-for-profit organisation
- is being sold, unless the sale is to a company that will carry on the business and the estate will be paid mainly in shares of that company
- is being wound up, unless this is part of a process to allow the business of the company to carry on
This PDF (possibly out of date now) adds more light. The forth page includes some examples of legitimate exceptions to some of the rules, for example dual listed companies can qualify for BPR if the second listing is a foreign equivalent to AIM such as the Emerging Securities Market (‘ESM’) of the Irish Stock Exchange. The document also discusses property holdings (as do a number of other sites), rules for companies "for sale" or being wound up, and other useful points.
This site has more depth on some of the complexities:
- On when an activity includes both investments & services:
"Thus, for example, BPR has generally been denied for property letting activities, even where the landlord provided some services (Martin and another (executors of Moore deceased) v CIR [1995] STC (SCD) 5 and Burkinyoung v CIR [1995] STC (SCD) 29). More…
