ONSIDE / BPR
HOW DOES BUSINESS
PROPERTY RELIEF (BPR) HELP
TO MITIGATE IHT?
Michael Taylor meets Ian Battersby, Seneca’s Business Development Director, to discuss the
growing use of BPR as an IHT strategy…
Firstly Ian, what is the background to this
increasingly popular alternative?
The traditional methods for mitigating Inheritance Tax
(IHT) such as gifts and Trusts are not always flexible enough
for everyone especially with increasing life expectancy and So what is a “qualifying business”?
the unknown challenges that can create. The thought of
transferring assets outside of an estate which might then There are a number of clear exclusions but in brief, the
be required at a later date i.e. to pay for residential care emphasis is on shares which are held in companies who
or merely funding a longer than expected retirement, is a perform “trading activities”, which are distinct from
serious barrier for many people. Equally, the 7 year time “investment activities”.
frame before lifetime giving provides 100% mitigation is
less than ideal especially for elderly clients. These factors In Seneca’s IHT Service, the underlying trading comes in
are an important and growing driver behind products and the form of fully secured, short and medium term lending.
services providing BPR and is becoming an increasingly Largely, because debt funding is one of our core day to
dominant theme in the planning work of many Financial day activities alongside equity investing and our corporate
Advisers.
advisory services.
So what is BPR?
It’s a statutory relief available on investments in unquoted
businesses. It was actually introduced in the Finance Act
1976 primarily to allow small business owners to pass on
business assets to their beneficiaries without incurring IHT.
Until that point, many businesses were being broken up or
sold in their entirety in order to pay the IHT. Not ideal in
a vital sector of the economy. The scope of the relief has
widened over time allowing more people to access it. Since
1996, investors with small non-controlling shareholdings in
qualifying businesses can claim 100% IHT relief.
18
Would you say that BPR is therefore a risky
option?
That would probably be a generally fair comment when
compared to traditional solutions but conversely, BPR
solutions are much easier to implement, considerably more
flexible and are effective in only 2 years which is far quicker
than most of the alternatives. However the real driver for
most people is that they do not have to pass ownership of
their assets away in order to achieve the benefits. From
there it becomes a case of ensuring that the investment
manager is of the required standard in terms of managing
the investment into trading activities both safely and wisely.