Business Property Relief (BPR) Trust
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A Business Property Relief (BPR) Trust is used to hold qualifying business assets (such as shares in an unlisted trading company or certain business interests) that attract 100% or 50% relief from Inheritance Tax (IHT).
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The trust allows the testator to pass value to beneficiaries while preserving BPR and maintaining control through trustees.
Life Interest Trust (IPDI)
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A Life Interest Trust (also called an Immediate Post-Death Interest Trust, IPDI) allows trustees to hold assets and pay the income to a named person (the life tenant) for life or a defined period (e.g. until remarriage).
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The underlying capital is preserved and passes to other beneficiaries at the end of the trust.
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Trustees may be given power to advance capital to the life tenant, outright or as a loan.
Why it’s used:
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Why it’s used
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To mitigate IHT by sheltering qualifying business assets.
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To protect business assets from beneficiaries’ divorce, bankruptcy, or spendthrift behaviour.
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To allow flexibility over who ultimately benefits and when, particularly where business succession is uncertain.
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To separate business assets from the main estate while still allowing family benefit.
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How it works
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Business assets are transferred into trust (often on death, sometimes in lifetime).
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Provided the assets qualify for BPR at the time of transfer, their value is relieved from IHT.
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Trustees can retain the assets or sell them and reinvest, depending on trust powers and tax planning objectives.
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IHT treatment
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If assets qualify for BPR, the transfer into trust is usually IHT-free.
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If trustees later dispose of the assets and reinvest into non-qualifying property, BPR is lost and future IHT charges may arise.
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Depending on the trust structure (commonly discretionary), relevant property regime charges can apply (10-year anniversary and exit charges), calculated on the value not covered by BPR.
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Key considerations
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BPR depends on the nature of the business and must be available at the time of transfer.
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Investment businesses generally do not qualify.
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Ongoing review is essential to ensure assets continue to qualify or to plan appropriately if they are sold.