What is business property relief for inheritance tax?

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# Business Property Relief (BPR) for Inheritance Tax

## What the law says

**Statutory basis**
Business Property Relief is found in Chapter I of Part V of the **Inheritance Tax Act 1984 (IHTA 1984)**, principally sections 103–113B. The core relief provision is **s.104 IHTA 1984**: where the whole or part of the value transferred by a transfer of value is attributable to the value of any "relevant business property", that value is **reduced** before IHT is charged.

**Rates of relief**
The reduction under s.104(1) is:
- **100%** for property falling within s.105(1)(a), (b) or (bb) — i.e. a business/interest in a business, unquoted securities giving control, and any unquoted shares
- **50%** for other relevant business property (e.g. quoted control holdings, and land/buildings/plant used in a controlled company or partnership)

**Categories of "relevant business property" (s.105(1) IHTA 1984)**
The six categories are:
- **(a)** Property consisting of a **business or interest in a business** → 100%
- **(b)** **Unquoted securities** of a company giving the transferor **control** → 100%
- **(bb)** Any **unquoted shares** in a company → 100%
- **(cc)** **Quoted shares/securities** giving the transferor **control** → 50%
- **(d)** **Land, buildings, machinery or plant** used wholly or mainly for the purposes of a business carried on by a **company the transferor controlled** or a **partnership** of which the transferor was a member → 50%
- **(e)** Settled **land, buildings, machinery or plant** in which the transferor had an interest in possession, used in their business (lifetime transfers only) → 50%

**Key exclusion — investment businesses (s.105(3))**
A business, interest in a business, or shares/securities are **not** relevant business property if the business consists **wholly or mainly** of:
> *"dealing in securities, stocks or shares, land or buildings or making or holding investments"*

This is an "all or nothing" test — if a business falls outside s.105(3), BPR is in principle available on the **entire** value.

**Exceptions to the investment exclusion (s.105(4))**
The s.105(3) exclusion does **not** apply to:
- A **market maker** or **discount house** carrying on business in the UK; or
- Shares/securities of a **holding company** whose subsidiaries' businesses do not themselves fall within s.105(3)

**Minimum ownership period (s.106)**
Property is not relevant business property unless it was **owned by the transferor throughout the two years immediately preceding the transfer**.

**Replacement property (s.107)**
Where property replaced other property, the two-year test is treated as satisfied if the combined periods of ownership of the original and replacement property amount to **at least two years within the five years** immediately preceding the transfer, and the replaced property would itself have qualified.

**Successions (s.108)**
Where the transferor became entitled to property on the **death of another person**, they are deemed to have owned it from the date of that death. If the deceased was the transferor's **spouse or civil partner**, the transferor is also deemed to have owned it for any period the spouse/civil partner owned it.

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## HMRC guidance / practice

**Overview**
HMRC confirms that BPR reduces the value transferred to the extent attributable to relevant business property under s.104. For deaths and transfers on or after **6 April 1996**, there are six qualifying categories, with 100% relief available in many cases.

**Partnerships**
HMRC confirms that BPR at 100% is available on a **partner's share** in a partnership business. Where 100% BPR is available on the partnership interest, **50% BPR** is also available on any land, buildings or plant and machinery **owned by a partner** but used wholly or mainly for the partnership's business. HMRC also confirms that where a traditional partnership incorporates as an LLP, the partner's period of ownership for BPR purposes is **not interrupted**.

**Trading vs investment companies**
HMRC emphasises that BPR **only applies to trading companies** — it does not apply to investment companies.

**100% relief and valuation**
Once HMRC is satisfied that all conditions for 100% relief are met, it can conclude a valuation request without needing to agree a value for the shares in question.

**Historical rates**
BPR was not available before 7 April 1976. The current 100% rate for control holdings has applied since **10 March 1992**, and for minority unquoted shareholdings since **6 April 1996**.

**Ascertained values**
Where BPR is at 100%, no IHT is charged and HMRC will not have needed to consider the value of the asset — so no value will have been "ascertained" for IHT purposes.

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