Which Types of Business Property Qualify for Relief?

Business Relief can be claimed on:

1. A business or an ownership stake in a business (e.g., a partnership interest).
2. Unquoted shares, including those traded on the Unlisted Securities Market (USM) or the Alternative Investment Market (AIM). However, shares listed on recognised overseas stock exchanges are considered quoted for Inheritance Tax (IHT) purposes.
3. A holding of shares or securities fully listed on a recognised Stock Exchange, either independently or combined with others, providing control of a company.
4. Land, buildings, plant, or machinery owned by a partner or majority shareholder and primarily used in the business of the partnership or company just before the transfer. (This applies if the partnership interest or shareholding would itself qualify for Business Relief upon transfer).
5. Any land, buildings, machinery, or plant primarily utilised for the transferor's business and held as settled property in which the transferor had a beneficial interest in possession.

What is the Rate of Relief?

If the asset qualifies for Relief, the applicable deduction rate from the capital value of the asset is as follows:

Date of Death after 6th April 1996:

100% – A business or ownership stake in a business. 100% – Unquoted company shares. 50% – Control holding of shares in a quoted company (more than 50% of the voting rights). 50% – Land, buildings, or plant and machinery used in a business of which the Deceased was a partner at death or used by a company owned by the Deceased. 50% – Land, buildings, or plant and machinery held in a Trust where the Deceased had the right to benefit from the Trust and the asset was used in a business carried on by the Deceased.

Which Businesses Do Not Qualify for Relief?

Relief cannot be claimed if the:

• Business or company mainly deals in securities, stocks or shares, land or buildings, or engages in making or holding investments.
• Business is not operated for profit.
• Business is under a sales contract, unless the sale is to a company intending to continue the business, and the sale is primarily for shares in the purchasing company.
• Shares in the company are under a sales contract or the company is being wound up, unless the sale or winding up is part of a reconstruction or amalgamation to enable the business to continue.

Relief may be available for:

The business of a market maker or discount house in the United Kingdom. Shares or securities in a company acting as a holding company, provided the group is not mainly involved in property, investment, or trading.

Do All Business Assets Receive Relief?

No, assets classified as excepted assets do not qualify for Business Relief.

What is an Excepted Asset?

An asset is excepted if it:

Was not primarily used for business purposes throughout the two years before the transfer (or since its acquisition by the business if more recent). Is not needed at the time of transfer for identified future business use, or is mainly used for the personal benefit of the transferor or a connected person (e.g., spouse, child, or relative).

What if an Asset is Not Mainly Used by the Business?

If any land or building is an excepted asset but a portion is exclusively used for business purposes, that part is treated as a separate asset. If the conditions for Business Relief are met, that part is considered in determining the value of relevant Business Property.

Final Thought

Business Relief can be claimed on various types of business property, including ownership stakes, unquoted shares, and certain assets primarily used in the business. The rate of relief varies depending on the asset and the date of death. However, relief cannot be claimed for businesses mainly dealing in investments or not operated for profit. Additionally, not all business assets qualify for relief, with excepted assets being those not primarily used for business purposes. It's important to assess each asset's eligibility carefully to maximise relief opportunities.