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Legal News | 6.07.23

Business Relief and IHT

Business Relief (BR), like Agricultural Relief as discussed in last week’s newsletter is another useful and relied upon tool for saving inheritance tax (IHT). If you own business assets, BR can reduce the taxable value of those assets, possibly to nil.

What is Business Relief?

BR works by reducing the taxable value of business assets by either 50% or 100% depending on the nature of the asset and how it is used. This means that the IHT due on these assets could be halved or removed completely.

What qualifies for Business Relief?

To qualify, the business to which the property relates must be a trading business. BR cannot be claimed if the company wholly or mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments.

The value of any assets in the business which have not been used wholly or mainly for the purposes of the business for two years prior to the transfer and are not required for future use of the business are excluded in calculating the relief due.

How long must the property by owned?

To qualify as relevant business property, the property must have either:

  • been owned by the donor (the person giving away the assets) throughout the period of two years before the transfer, or
  • replaced other relevant business property with the combined period of ownership being two out of the five years prior to the transfer.

If the property is inherited on the death of a spouse/civil partner, the recipient is treated as having acquired the asset when their deceased spouse/civil partner acquired it.

This is a complex area and advice will be needed if Business Relief might be available. If you require further information, please get in touch with your usual Wansbroughs’ contact or email wealth@wansbroughs.com.


Posted By Our Wills, Tax, Trusts & Probate Team