Business Relief (BR) was introduced into inheritance tax legislation in 1976, although at the time it was known as Business Property Relief. The concept was to allow owners of small businesses to pass the relief on to their beneficiaries without the latter having to break it up to pay tax. The key premise of BR is that it allows the owners of shares in unquoted businesses, subject to specified conditions, to be exempt from inheritance tax. The shares have to be held for a minimum of two years at the time of death. There are also restrictions on what sorts of businesses are eligible. The following do not meet the criteria (source: HMRC):
Any other business should be eligible, although it should be noted that simply holding cash in a company falls under the ‘holding investments’ restriction and so would not be eligible.
For the purposes of BR, ‘unquoted’ also includes AIM-listed stocks. There is also a category of relief which allows 50% relief for certain other business assets, although this is not of relevance to this report. Full details can be found on the HMRC website https://www.gov.uk/business-relief-inheritance-tax. For investors, this has an obvious appeal, in that, if they can invest assets into an appropriate business then, after two years, those assets will be exempt from inheritance tax. There are a variety of products, schemes and services which offer this possibility. In broad terms, they can be divided into two groups: AIM portfolio services and non-AIM products.
This report has been written to coincide with the launch of the Hardman & Co panel service for Business Relief (BR) products, to read more about Business Relief and the services which we provide, please click to download the full report.