Business Property Relief

Online Will Writing Blog Article
Table of Contents
    Add a header to begin generating the table of contents

    Most business owners are aware of the generous inheritance tax reliefs that make assets used in the business exempt, or partially exempt, from inheritance tax but there are some situations where the relief can be denied.

    The most common situation that can arise is where a small business is owned by a number of people and an agreement is entered into to allow succession of the business in the event of a death occurring before retirement. This agreement will normally stipulate that the deceased’s personal representatives are required to sell their shareholding to the remaining shareholders who are also required to buy it.

    HMRC however, view this as a binding contract for sale and, where such a contract exists, business property relief is not given.

    This problem can easily be avoided by ensuring that any agreement set up for a company grants an option to purchase and sell rather than making the transaction a contractual requirement.

    The relief is also not available on family company shares if the company wholly or mainly deals in shares or securities, land or buildings or investments. HMRC apply a 50% test to the definition of ‘mainly’ which covers the capital employed, employee time, turnover, profits and the overall context of the business.

    Finally, a business that is too ‘cash rich’ can be denied relief in relation to the cash on the balance sheet at the date of death if it is considered that this is in excess of the amount required for the purpose of the business. To avoid this happening regular board meetings should be held and reasons for cash balances minuted such as for specified future investments or trading needs.

    Care also needs to be taken when advising on lifetime gifts and the application of business property relief. The circumstances of the transferee must be taken into account as, if they die within seven years of the gift, it will be necessary to assess whether the relief continues to apply or whether the value of the gift will be charged to IHT.

    In order for the relief to be available the following must apply:

    • The property has been owned by the transferee since the gift was made and until the death of the transferor

    • The property is still classed as relevant business property With a carefully drafted Will and appropriate lifetime planning your clients can ensure the maximum reliefs and benefits are passed to their families and beneficiaries.

    Share this post

    Matt Walkden Will Writer

    About Matt Walkden

    I am a Professional Will Writer and I offer a small number of other products that complement my Will Writing such as Lasting Power of Attorneys (LPA’s), Fixed Price Estate Administration, often called Probate and some Property Products such as changing a family home from Joint owners to Tenants in Common.

    Contact An Expert Today

    Pay by Card or PayPal

    Read why over 13,000 people have written a will with us...

    As well as the many hundreds of times our clients recommend us to their friends and families, please read what some of them have written to us and said…

    “They really do cover everything thoroughly and provide comprehensive supporting information with friendly and empathetic telephone support, during what could be for some people, a traumatic process. I am so pleased thatI found them whilst doing a lot of research online and I can now rest assured that my legacy is in safe hands.”
    Mrs R. Dow, Cornwall
    “I’m very impressed with the service that your company has offered and how quick and hassle free the process has been. I will definitely recommend your service to my family and friends.”
    Miss D. Blakley – Kent
    “Please be assured that I have found your service to be nothing short of exceptional and will have no hesitation in recommending yourselves to anyone considering making a Will.”
    Mr A. Sharp, Cornwall

    Worked with us recently? Leave us a review.

    Latest Blog Posts

    When it comes to your peace of mind and your family’s welfare, the right time is now. Take a few moments to start the process of creating your will today and receive the first draft in as little as 48 hours.

    Deceased Estate Online Will Services

    Deed of Variation

    Deed of Variation and the three main ways that they can be used to protect assets and reduce Inheritance Tax
    Read More
    Will Writing Guardians

    The Importance of Family Will Writing

    Many people, especially young families, postpone family will writing. Maybe it is because it may seem unpleasant, far off, or it appears as a physical ...
    Read More
    Town Houses Blog

    Your Home

    Make Sure the Right People Inherit Your Home For most of us these days our home is our biggest asset. And with mortgage interest rate ...
    Read More