After we delved into EIS and VCTs in previous editions, we now turn our stare to BR qualifying assets. We take a whistle-stop tour of what, how, why and who of BR investments as a recap of this valuable investment and estate planning tool as we chug towards the end of the tax year.

What is business relief?

Business Relief (BR), formerly referred to as Business Property Relief, was introduced to allow small family-run businesses to be passed down the generations.

The general principle is that a privately owned business can have its shares passed down to their children, in the event of death provided that a number of conditions are met.

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 inheritance tax (IHT) burden. 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).

How are BR-qualifying assets available?

BR is usually available through investing in shares in a qualifying company listed on the Alternative Investment Market (AIM), either directly or through an AIM portfolio. The challenge with individual holdings is selecting the right funds as with any investments, however, there is also an accessibility issue in having holdings in smaller companies. That is why so many decide to use AIM portfolios over holding individual shares.

Additionally, in 2013 the UK government changed the rules to allow AIM-listed shares to be held within Individual Savings Accounts (ISAs). That means that investors can now hold BR-qualifying shares within a tax-efficient ISA wrapper. So, if access to the funds is required within the investor’s lifetime (because who knows what might happen) In reality, BR investments are used as an IHT then the withdrawals would be free of tax.

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