Syllabus A3. Inheritance Tax A3c. Computing transfers of value

A3cii. ii.Business property and agricultural property relief

Syllabus A3cii)

Advise on the availability of business property relief and agricultural property relief

Business Property Relief

BPR is a very important relief that significantly reduces the value of lifetime gifts and the value of an individual’s death estate if certain conditions are satisfied.

What conditions need to be satisfied to obtain BPR?

  1. The property must be relevant business property. 

  2. The property must have been owned for a continuous two years prior to the transfer.

  3. If the property has been transferred from a spouse the periods owned by each spouse can be added together on the second transfer to see if BPR is available. 

    For example, if a husband owned relevant property for 1 year and transferred it to his wife, then the wife owned it for another year and transferred it to their son, BPR will be available on the transfer to the son because the total time of ownership for husband and wife can be added up.

  4. Where the property was a lifetime gift, the business property must either still be owned by the donee or have been replaced with other relevant business property at the date of the donor’s death in order to get BPR on the additional tax payable by the donee. 

    For example, if a father gifted his son an unquoted shares holding during his lifetime, this will be a P.E.T. and IHT will only be payable if the father dies within 7 years of making the gift. If the son sells the shares, he must replace them with relevant property for BPR in order to get the relief when the father dies.

  5. Where relevant business property was inherited and was eligible for BPR at the time of transfer one, there is no minimum ownership period for BPR on transfer two. 

    This is called the successive transfers rule. 

    For example, if a father gifted his son unquoted trading shares on his death which he had owned for 4 years and were eligible for BPR, if the son dies within 1 year of the gift and gives them to his brother on death, this second transfer will automatically be eligible for BPR because the first transfer was eligible for BPR.

  6. BPR is not available for excepted assets which are assets held for investment purposes.

  7. Any business involved wholly or mainly in dealing in land or buildings and making or holding investments is not entitled to BPR.

What is relevant business property for BPR?

There is no upper limit on the amount of the relief and it applies to assets situated anywhere in the world.

Asset Condition Amount of BPR available
Quoted shares and securities Individual must have a controlling interest in the company 50%
Unquoted shares and securities (including AIM securities) None 100%
Land, buildings, plant and machinery Must be owned personally and used in the business controlled by the individual 50%
Sole trader/partnership business 100%


Which rate of BPR will be available in the following situations?

  1. Partnership share in a firm of accountants

  2. 20% shareholding in a trading company listed on the Stock Exchange

  3. 28% shareholding in an unquoted trading company


  1. 100%

  2. 0% (Not a controlling interest)

  3. 100% (Ltd Co - any interest is allowable)


On 31/05/2018 Wane gifted 40,000 shares in ABC Ltd., an unquoted trading company to his nephew. 

Wane had owned the shares since 2002 and on the date of the gift, the shares were worth £200,000. 

On this date, ABC Ltd. owned assets worth £500,000 which included an investment property valued at £50,000.

  • What will the value of the transfer be?


This is a gift to his nephew, therefore it is a P.E.T.

Transfer value £200,000
BPR £450,000/£500,000 * £200,000 = (£180,000)
18/19 Ann Ex. (£3,000)
17/18 Ann Ex. (£3,000)
Gross chargeable amount £14,000

  • Notice carefully that BPR is only available for trading assets, it is not available for assets held for investment.

Agricultural Property Relief

APR is a 100% relief and is very similar to BPR, but gives relief for transfers of agricultural property.

What conditions need to be satisfied to obtain APR?

  1. The property must be relevant agricultural property situated in the UK, the Channel Islands, The Isle of Man, or in the European Economic Area.

  2. It must have been owned for the minimum period of ownership, two years for owner occupied farms and seven years for tenanted farms. 

    For example, if someone is farming the land themselves, this is a owner occupied farm which has a minimum ownership period of 2 years, and if someone has rented the farm to someone else, this is a tenanted farm which has a minimum ownership period of 7 years.

What is relevant agricultural property for APR?

  1. Cost of the land

  2. Cost of the farmhouse

  3. Cost of the barns

  4. Cost of the shelter belts

  5. This does NOT include cost of the stock, the cost of plant and machinery or the cost of goodwill


Greg is gifting his farming business on 30/06/2018 to his son. 

Greg has lived on the farm and worked the business for the last 10 years.
Agricultural value £500,000
Development value £400,000
Animals and inventory £150,000
Plant and machinery £80,000
Total £1,130,000

  • What is the chargeable amount of the gift to Greg’s son?


Transfer Value £1,130,000
APR (100%*£500,000) = (£500,000)
BPR 100% *(£400,000+£150,000+£80,000) = (£630,000)

Chargeable amount Nil

Note carefully that BPR will be available for the developmental value, animals and inventory and plant and machinery because these are assets of the trade that is being given away.