Inheritance Tax and business property

September 2007

Ordinarily business property qualifies for a 100% exemption from inheritance tax. This article highlights a particular problem for the estate of business property owners when the time comes to consider inheritance tax - usually date of death. The following comments only apply if you own the property personally and the property is used by your company or a trading partnership of which you are a member.

If you own the property personally business property relief is restricted to 50% of the value of the property used by the company and
This 50% is only available if you own more than 50% of the shares in the company when the property is subject to an inheritance tax charge.

Accordingly if you have given away your shares prior to your death it is likely that no relief will be given.

It would of course be possible to transfer the property into the company's ownership prior to your demise but this would trigger a stamp duty land tax charge and thus limit the effectiveness of the plan.

Of course in the real world other taxes need to be taken into account when planning for the acquisition and disposal of business property, particularly capital gains tax. If you are considering the purchase or sale of commercial property and would like to discuss strategies to minimise the inheritance tax and other tax risks please contact us and make an appointment to meet.