My clients (husband and wife) have a Limited Company with a 50/50 shareholding. It is an Engineering/Fabrication company and has been trading for four years. They have asked me to do some Estate Planning to look at their exposure to Inheritance Tax (IHT) and I’m unsure as to whether IHT Business Property Relief (BPR) will be available even though they’ve held the shares for more than two years. I have read some information indicating that it would be due, but then I’ve also read about a rule where the deceased needs to have control of the company in order to qualify. Can you confirm if BPR is due?
Where an individual holds any amount of unquoted shares, including shares listed on the Alternative Investment Market (AIM) they will qualify for 100% BPR (whether they have control of the company, or, not).
As an alternative, where an individual holds unquoted securities which on their own or combined with other unquoted shares or securities give control of an unquoted company then they will also qualify for 100% BPR.
In both situations in order to qualify for 100% BPR the shares or securities must be held in a trading company and care must be taken where companies hold investments. The legislation states at IHTA1984/s105(3) that shares in or securities of a company are not relevant business property if the business carried on by the company consists wholly or mainly of:
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