When working out how much inheritance tax needs to be paid, business relief reduces a company’s value and its assets. For tax reasons, any share or ownership of a business is included in the estate. You may be eligible for business relief of either 50% or 100% on some of an estate’s business assets. These can be passed on as part of the will or while the business owner is still alive.
How to Claim Business Relief
As an administrator of the estate or the executor of the will, you’re entitled to claim business relief upon valuing the estate. An inheritance tax account form and a partnership or company assets form. When calculating your relief, you’ll have to evaluate the market value of the company at hand. Business relief can be claimed on machinery, unlisted shares, buildings, and property alike.
What Qualifies for Business Relief?
You’re entitled to 100% business relief for inheritance tax on shares in an unlisted company, a business, or interest in a company. You’re able to get 50% business relief on machinery, buildings, or land used and held in a trust that it benefits from. Similarly, you’re entitled to 50% for each of these assets when they’re owned by the deceased owner or shareholder. You can also get 50% business relief on shares controlling upwards of 50% of the voting rights in a company. You’re only entitled if the deceased owned the asset for a minimum of two years prior to their death.
What Doesn’t Qualify for Business Relief?
However, you won’t be able to claim business relief if your business is being sold, is a non-profit organization, or primarily handles investments, buildings, land, shares, stocks, or securities. Similarly, you’re also unable to claim business relief if an asset isn’t required for the future use of the company. If it wasn’t used in the two years before it was passed on, or if it qualifies for agricultural relief.
Give Away Business Property or Assets
When business owner is still alive, they’re able to give away assets or company property. This means the property is still entitled to business relief on inheritance tax. This can be done as long as the assets or property qualify.
How to Get Business Relief on a Gift
Where assets are given as a gift, the recipient will keep them as an ongoing concern until the donor passes. In order to keep the relief, the recipient must replace the assets, with something of the same value. They’re only entitled to relief in an instance where the donor owned the asset or company for a minimum of two years ahead of the agreed date. Despite this, a gift that has been made upwards of seven years prior to the death of the donor doesn’t contribute to their estate for inheritance tax reasons.
Understanding Business Relief for Inheritance Tax
The laws surrounding inheritance tax will differ from location to location. This means that the above shouldn’t be considered as an exhaustive guide. Instead, you should be sure to check with your local authority via your government website or otherwise. This is the best way to familiarise yourself with your local, regional, or national laws surrounding business relief for inheritance tax. Dealing with grief whilst maintaining a business is an extremely stressful situation, which is why it’s important to ensure that all paperwork is in order. This will help relieve stress and assist your peace of mind.
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