Avoid Inheritance Burden; Philip Harrison, Partner at Solihull-Based Private Client Law Firm Meridian Private Client LLP Looks at How Some Family-Owned Businesses Can Benefit from One Particular Tax Break

The Birmingham Post (England), February 23, 2012 | Go to article overview

Avoid Inheritance Burden; Philip Harrison, Partner at Solihull-Based Private Client Law Firm Meridian Private Client LLP Looks at How Some Family-Owned Businesses Can Benefit from One Particular Tax Break


Byline: Philip Harrison

The families behind privatelyowned businesses can benefit from a valuable tax break in the shape of Business Property Relief (BPR).

BPR means that, as long as the business or shares have been owned for two years, full relief from inheritance tax may be obtained when the owner or shareholder passes on.

This relief was first devised to enable private companies and family businesses to survive and prosper through being passed on through the generations, without entrepreneurs and owners having to sell them to pay inheritance tax.

It has been retained despite the fact such succession happens relatively infrequently these days.

Entrepreneurs and owner managers can minimise the IHT payable by their estate through using BPR to the full but there are pitfalls to be avoided and there is planning to be done.

BPR has several advantages over gifts, another traditional method of reducing potential IHT liabilities, although BPR is not necessarily straightforward and professional advice is necessary.

Assets sheltered by BPR can simply be retained until death, although the relief can also be used in conjunction with gifting for more sophisticated planning.

One advantage of BPR in tax planning terms is that the qualification period is relatively short - BPR can be established within two years.

In contrast, where gifts are used to pass wealth on outside the inheritance tax net, the donor has to survive for seven years after the gift is made to stop it being wholly or partly brought back into an estate for IHT.

Another factor is that gifts cannot have strings attached - the donor must not benefit from the asset given away, and all control and influence is lost (at least unless a trust is used).

On the other hand, BPR allows the entrepreneur or shareholder to retain economic ownership and control or influence in the business, effectively until his or her death.

BPR can be claimed on any qualifying business assets that the individual has owned for two years or more.

To qualify for 100 per cent relief, shares must be unquoted, although many companies listed on the Alternative Investment Market (AIM) or PLUS Market companies are eligible.

Controlling interests in fully listed companies qualify for 50 per cent relief. In this article though, I am concentrating on private businesses.

The businesses themselves must primarily be trading and investment firms do not qualify. Mixed trading and investment businesses need to be considered carefully to establish their status, considering factors such as the level of revenue and profit from each activity. If it can be established that the business is primarily trading, the secondary investment business will also qualify for relief, which would not be the case if it were carried on separately.

Even where the business qualifies, assets such as surplus cash balances, which are not needed immediately or in the foreseeable future for business purposes, can restrict the availability of BPR. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Avoid Inheritance Burden; Philip Harrison, Partner at Solihull-Based Private Client Law Firm Meridian Private Client LLP Looks at How Some Family-Owned Businesses Can Benefit from One Particular Tax Break
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.