A valuable relief for Investors!

Since its introduction as part of the Finance Act 1976, Business Property Relief (BPR) has come a long way. Its original aim was to ensure that a family owned business could survive as a trading entity without having to be sold to pay IHT after the death of its owner. However successive governments have recognised the overall benefit to the wider economy of a tax relief which encourages investment in trading companies. The assets qualifying for BPR have been extended over time to include minority holdings in unlisted trading companies as well as shares in companies listed on the Alternative Investment Market (AIM). Since 2013 AIM-listed shares can now be held in an individual savings account (ISA) making the relief more accessible to ordinary investors. One of the attractions of BPR compared with more traditional strategies of minimising IHT, such as gifting or transferring assets into trust, is that qualifying investments are 100% effective for IHT purposes within 2 years of ownership rather than the traditional timeframe of 7 years from the date of the gift. Also, the capital remains accessible if required to deal with changing financial circumstances such as a longer than expected retirement or residential care, although doing so does negate any IHT benefit A word of caution however… although AIM is home to over 1,000 companies some of which are household names and have been trading for many years, not every AIM listed company will qualify for BPR and the qualifying criteria may change over time. Investing in unlisted companies and companies listed on AIM can be much riskier than investing in companies listed on the main London Stock Exchange as the day-to-day share value can rise and fall much more significantly. Advice should always be sought from a professional adviser before making such investments. As Benjamin Franklin said, the only things that are certain in life are death and taxes. However in the right circumstances BPR can play a part in IHT mitigation.