Business Property Relief (or Business Relief) (‘BPR’) reduces the rate at which inheritance tax (‘IHT’) is payable, but changes on 6th April 2026 will affect how much relief is available. We are now in the window for strategic planning before the 6th April 2026 changes take full effect. For business owners, acting now could lock in significant tax advantages before the new regime lands.
See our recent blog Business Relief Reform: What are the New Rules? for details of the new rules and how they may affect you.
In the fourth of a series of five blogs, we highlighted the need for business owners to:
- Review inheritance tax exposure and the effect of the new rules;
- Consider banking the business relief using the current rules (often using trusts);
- Consider restructuring of the business ownership to utilise all available business relief.
In this blog, we set out some of the options which might be considered to bank business relief and / or restructure the business ownership. In this article, we focus on companies, however, most of the options will be relevant to both partnerships and limited liability partnership (‘LLPs’) as well.
Should I gift some of my shares?
One of the most common solutions we are seeing is to make gifts of shares either to trusts or to other individuals. Doing so can spread the value of the company amongst various individuals and may give shareholders access to a minority discount (a 25% shareholding in a company may not be worth 25% of the whole of the company) but should not be done without proper advice. Gifts of shares to trusts can result in immediate IHT charges if the full tax implications are not considered and likewise gifts to individuals can result in an IHT charge if a person passes away within a certain time after making the gift. Whilst useful, gifts are not ‘silver bullets’ which will be suitable for everybody.
If you are considering gifting your shares you should not do so without a proper review of your articles of association and / or shareholders agreement. Consideration should be given to both share ownership and decision making. It is often appropriate to put in place strict restrictions on transfer so that anybody who is gifted shares cannot transfer shares outside a specific class of people (often family members). As for decision making, in giving away shares this usually has an impact upon a person’s voting rights. Whilst a founder shareholder may be happy to give away value for the sakes of IHT they may be more reluctant to hand over complete control. We often find that we need to consider this carefully and make sure that we can strike a balance between IHT efficiency and making sure that the right people are actually operating the company.
What if gifting is not an option for me?
If gifting is not desirable, whether for tax reasons or otherwise, there are other things that can be put in place to restrict the value of a person’s shareholding. It is possible to use the share structure within a company to cap the value of a person’s shares so that growth value automatically belongs to others without the need for any gifts to be made.
As with gifting shares, the company’s corporate governance needs careful consideration to make sure that its rules align with the shareholders’ intentions, again considering, amongst other things, share ownership and decision making.
What if there are parts of my company which do not qualify for Business Relief?
We often see companies which have a combination of business assets and non-business assets. The status of these companies is not changed by the changes to IHT and Business Relief which will soon come into effect, but a focus on IHT brings these issues into sharper focus. If a company has significant non-business assets this can mean that the whole company does not qualify for Business Relief at all. If this is the case then any planning that has been done to take the greatest benefit from Business Relief is effectively wasted. There are, however, options. It is possible to demerge a company so that business and non-business assets are held in separate entities. Doing this can help to “bank” Business Relief on the trading assets, maximising the use of reliefs which would not have otherwise been available.
Are you ready to start your planning? Click here to request a free checklist to help begin that first step in the process and to start a conversation with our legal and tax advisors. You will also receive an invite to one of our free Q&A sessions where you can join our live discussion and ask any questions you may have.