Why use a Business Property Relief Discretionary Trust?

Why use a Business Property Relief Discretionary Trust?

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It is fairly common for spouses, where at least one of them owns a business and they wish to leave this to their spouse upon their death. On first death, this would be free of inheritance tax due to the spousal exemption. Second death should also be considered. If a business qualifies for business property relief, it may also pass IHT free on second death (should it qualify for the full 100% relief). What if the surviving spouse does not want to run their late spouse’s business, or if a business partner wants to buy the deceased’s shares off the spouse? They may decide to run the business for a while but eventually sell it on in their old age to retire. This would lead to an increased Inheritance Tax liability, as an asset which is Inheritance Tax exempt (the business) is replaced by one subject to Inheritance Tax (cash)…

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Why use a Business Property Relief Discretionary Trust?

Business Property Relief (BPR)

By | Business Property Relief | No Comments

What is BPR? A relief applied to business property and can provide up to 100% relief from Inheritance Tax. There are a number of conditions which are required to be met: The business must be a qualifying business, The business must be what is referred to as ‘relevant business property’, and; Ownership conditions must be fulfilled. The business must be a trading business rather than an investment business and therefore must meet the ‘wholly and mainly’ test of trading, meaning that the business must not consist wholly or mainly of the making or holding of investments. In other words; businesses which deal in securities, stocks and shares or in land and buildings such as buy-to-let portfolios will not attract the relief. Property developing itself may attract the relief but the renting out of property is an investment activity therefore making it a mixed business and if the business consists of…

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