Agricultural and Business Property Relief

Yes, provided the business of the partnership complies with the conditions for BPR, and the assets of the business also qualify, BPR is available for partnerships.

A two-year period of ownership is generally required.  There are certain circumstances in which the required period is relaxed.  For example, if relevant business property is transferred from one spouse or civil partner to the other on death, the survivor is automatically credited with the deceased's ownership period. In addition, if relevant business property is replaced within five years by new property that also qualifies for BPR, the two-year holding requirement is also relaxed.

The BPR cap will affect IHT planning because any property in excess of the cap, that would currently qualify for BPR at 100%, will in future only qualify for relief at 50%, as will all AIM-listed shares.  Accordingly, rather than retain qualifying property until death, as owners may have done previously, they may now choose to settle or otherwise give away property up to the value of the £2.5 million cap every seven years (when it renews).  For those planning to create trusts, it will be important to bear in mind that the trustees will also be subject to a £2.5 million allowance, and property in excess of this value will be liable to ten-yearly and exit charges at 50% of the rate of tax otherwise applicable (up to 6% on such events).  Alternatively, it will still be possible to make a "potentially exempt transfer" of property of any value to an individual or individuals.  Provided the donor survives for at least seven years after making such a gift, it will pass free of IHT (and the tax rate gradually reduces each year that the donor survives between 3 and 7 years).

The government has now confirmed that the £2.5 million allowance will be transferable between spouses and civil partners.  So, if one spouse dies without using all or any of their £2.5 million allowance, whether because they do not have any or sufficient qualifying property to use up the allowance or because they leave all their qualifying property to the survivor (free of IHT due to spouse relief), the unused portion of the deceased's allowance will be added to the survivor's own allowance.  Potentially, a surviving member of a couple will be able to leave up to £5 million of qualifying property tax free to their successors.  This may be increased to £5.65 million if their and the deceased's nil rate bands (currently £325,000 each) are also available.  If the first spouse or civil partner to die has already done so, or dies between now and 6 April 2026, they will be treated as leaving the survivor a full £2.5 million allowance.

Yes, property that would qualify for BPR if it was held by individuals will also qualify for BPR when held by trustees.  Trustees holding qualifying business property will be subject to their own £2.5 million allowance for 100% BPR, which will renew every ten years.

There are many differences between APR and BPR and to cover them all would require a lengthy explanation.  However, one significant difference is that APR applies specifically to property used for farming and certain other agricultural purposes.  BPR is wider as it applies to shares and other property used in any sort of business, provided that the business is carried on with the intention of making a profit and it does not consist "wholly or mainly" of dealing in shares, land or buildings or making or holding investments.

Yes, if you transfer assets either to an individual or into trust before 6 April 2026, and survive seven years from the date of transfer, or die before 6 April 2026, 100% BPR will apply and the transfer will be free of IHT.

Yes, BPR is available to anyone who owns qualifying business property that would otherwise be subject to UK IHT, regardless of their residence.

BPR may apply to relevant property of a business that is carried on with the intention of making a profit.  As noted above, that business must not consist "wholly or mainly" of dealing in shares, land or buildings or making or holding investments.  Accordingly, the application of BPR to an individual business will depend on the specific circumstances, but shares and other assets of a company that focused purely on investment would not qualify for BPR.

If the value of relevant business property that you own exceeds the £2.5 million allowance, BPR at 50% will apply to all such property in excess of that limit.

Yes, provided that the business complies with the conditions above.

If company directors own shares or other assets that qualify for BPR, and have done so for the relevant period of time, they will be entitled to BPR on those assets in the same way that a business owner would.

Up until now, many owners of business property have been happy to retain it until death, knowing that it would pass to their successors free of IHT.  The new limit on the value of property that can qualify for BPR at 100% is likely to result in lifetime planning becoming a higher priority in the future.  Business owners will want to make gifts and other transfers to spouses or civil partners, children and other successors during their lifetime in order to utilise spouse and other exemptions, as well as the renewable £2.5 million BPR allowance.