Business Relief – How does that work?

April 2023

In order to reduce their inheritance tax liability, many clients decide that they would like to make gifts to family or settle assets into trust

In order to reduce their inheritance tax liability, many clients decide that they would like to make gifts to family or settle assets into trust, which for many people is an appropriate measure and it achieves the desired outcome. However, some people may feel that they will not live for the required 7 years until the assets become completely free from inheritance tax, and as a result their options are reduced somewhat.

This is where using investments that qualify for Business Relief can sometimes be considered, as an investment in a BR-qualifying company can be passed down to beneficiaries free of inheritance tax on the death of the shareholder provided it has been held for at least two years at that time. This can be hugely beneficial for clients who feel that 7 years is a long time to survive before their assets are free from Inheritance Tax.

So, how does it work? Typically, Business Relief will usually be available for shares in an unquoted qualifying company or shares in a qualifying company listed on the Alternative Investment Market. Similarly, an unincorporated qualifying trading business like a partnership may qualify for Business Relief, but it is important to note that the rules and regulations surrounding business relief are complex, and the availability of relief will depend on individual circumstances.

Although Business Relief can often play a vital role in estate planning, anyone considering Business Relief investments should be aware that their capital is at risk and that they may get back less than they invest. Investments in unquoted companies or those quoted on the Alternative Investment Market can typically fall or rise more sharply than shares in larger companies listed on the main market of the London Stock Exchange, and may be harder to sell. In addition, there cannot be any guarantee that companies that qualify today will remain Business Relief qualifying in the future. That being said, it can be a very useful tool to utilise for the right client that requires a reduction in Inheritance Tax within a shorter period of time.

If you would like to discuss Business Relief for yourself or one of your clients, please contact us below.

Important note:

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. The Financial Conduct Authority do not regulate Tax planning or estate planning. Business Property schemes can invest in assets that may at times be hard to sell. This means that there may be occasions when you experience a delay or receive less than you might otherwise expect should you decide to sell investment. Full details of the specific risks applicable will be discussed and agreed prior to any recommendation or investment being made.

Share the article

Contact us

Address 1st Floor, Avenue House
42-44 Rosemary Street
Belfast, BT1 1QE
Phone 028 9023 0696