IHT Relief For Businesses And Farms
There is currently a very generous 100% relief from Inheritance Tax (IHT) for passing on businesses and farm land during lifetime and on death. The rationale for Business Property Relief (BPR) and Agricultural Property Relief (APR) is to enable businesses to be passed on without the need to sell off assets to pay the IHT due on the transfer.
Currently if a business is wholly or mainly for the purpose of investment, then it will not be eligible for BPR. This is not always straightforward to determine. Many estates include both trading and non-trading business assets, and establishing whether this test is met can be difficult to establish. The ‘wholly or mainly’ test is generally considered to be a greater than 50% test and the Office of Tax Simplification (OTS) are suggesting that the test should be aligned with the much stricter 80:20 test that applies for Capital Gains Tax (CGT) gift of business asset holdover and Entrepreneurs’ Relief. If introduced many more business transfers would be liable to IHT.
On the positive side the OTS have recommended that IHT Business Property Relief should be extended to include Furnished Holiday Lettings aligning the tax treatment with that of Income Tax and CGT where they are treated as “trading” providing that certain conditions are met.
To find out more about Inheritance Tax Relief, please contact our Tax Partners, Steve Crompton or Lucy Williams, on the details below:
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
direct dial: 01942 292543
mobile: 07807 053494