1. Overview

Business Relief reduces the value of a business or its assets when working out how much Inheritance Tax (IHT) has to be paid.

Any ownership of a business, or share of a business, is included in the estate for IHT purposes.
You can get Business Relief of either 50% or 100% on some of an estate’s business assets, which can be passed on:
while the owner is still alive
as part of the will
How to claim relief

As the executor of the will or administrator of the estate, you can claim Business Relief when you’re valuing the estate.

You must use the market value of the business or asset when calculating relief at 50%.

You can claim relief on:
property and buildings
unlisted shares

2. What qualifies for Business Relief

You can get 100% Business Relief on:
a business or interest in a business
shares in an unlisted company

You can get 50% Business Relief on:
shares controlling more than 50% of the voting rights in a listed company
land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled
land, buildings or machinery used in the business and held in a trust that it has the right to benefit from

You can only get relief if the deceased owned the business or asset for at least 2 years before they died.

What doesn’t qualify for Business Relief
You can’t claim Business Relief if the company:
mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments
is a not-for-profit organisation
is being sold, unless the sale is to a company that will carry on the business and the estate will be paid mainly in shares of that company
is being wound up, unless this is part of a process to allow the business of the company to carry on

You can’t claim Business Relief on an asset if it:
also qualifies for Agricultural Relief
wasn’t used mainly for business in the 2 years before it was either passed on as a gift or as part of the will
isn’t needed for future use in the business

If part of a non-qualifying asset is used in the business, that part might qualify for Business Relief.

Example If you use one room in a building as a shop and the other rooms are used as your home, the shop will qualify for Business Relief but the rooms won’t.

Relief for agricultural property
You may be able to get Business Relief on a transfer of agricultural property (e.g. farmland, buildings or farm equipment) which isn’t eligible for agricultural relief.

3. Give away business property or assets

Someone can give away business property or assets while they’re still alive and the estate can still get Business Relief on IHT, as long as the property or assets qualify.

How to get Business Relief on a gift
If someone gives away business property or assets, the recipient must keep them as a going concern until the death of the donor if they want to keep the relief.

They can:
replace the property or assets – like machinery – with something of equal value if it’s for use in the business
only get relief if the donor owned the business or asset for at least 2 years before the date it was given

When is a gift no longer liable for Inheritance Tax
Any gift made more than 7 years before the donor’s death doesn’t count towards their estate for IHT purposes.

If you need further advice or help on this please call us on 01752 607040 or email us at wills@thewillcentre.com