Business Relief (BR) Schemes

Business Relief (BR) is a tax relief provided by the UK Government as an incentive for investing in specific types of trading companies. It was introduced by the Government in the Inheritance Tax Act 1984, and has since been extended to include investments in certain types of unquoted companies (not listed on the main stock market) to encourage investment into this area.

BR was created to allow small businesses to be passed down through generations without incurring an IHT liability. However, over the years the scope of BR has been widened, making it an attractive option for individuals looking to invest in companies in order to remove a potential IHT burden.

Once assets qualifying for BR are held for two years, they are exempt from IHT (providing they are still held at the time of death). It is available on various categories of ‘relevant business property’ and at different rates:
 

• 100% relief is applicable on:
  • A business or interest in a business; and
  • Shares in an unlisted company.
• 50% relief is applicable 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; and
  • Land, buildings or machinery used in the business and held in a trust that it has the right to benefit from.

There is no minimum for individual shareholdings but packaged schemes may require a minimum investment in the region of £25,000.

Once assets qualifying for Business Relief are held for two years, they are exempt from IHT, providing they are still held at the time of death. Any capital withdrawals will no longer qualify for BR and therefore lose any IHT exemption.