Business Property Relief (BPR) Trust
-
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).
-
-
The trust allows the testator to pass value to beneficiaries while preserving BPR and maintaining control through trustees.
Life Interest Trust (IPDI)
-
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).
-
The underlying capital is preserved and passes to other beneficiaries at the end of the trust.
-
Trustees may be given power to advance capital to the life tenant, outright or as a loan.
Why it’s used:
Why a Business Property Relief Trust is used
-
To mitigate IHT by sheltering qualifying business assets.
-
To protect business assets from beneficiaries’ divorce, bankruptcy, or spendthrift behaviour.
-
To allow flexibility over who ultimately benefits and when, particularly where business succession is uncertain.
-
To separate business assets from the main estate while still allowing family benefit.
How a Business Property Relief Trust Works
-
Business assets are transferred into trust (often on death, sometimes in lifetime).
-
Provided the assets qualify for BPR at the time of transfer, their value is relieved from IHT.
-
Trustees can retain the assets or sell them and reinvest, depending on trust powers and tax planning objectives.
IHT treatment
-
If assets qualify for BPR, the transfer into trust is usually IHT-free.
-
If trustees later dispose of the assets and reinvest into non-qualifying property, BPR is lost and future IHT charges may arise.
-
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.
Key considerations
-
BPR depends on the nature of the business and must be available at the time of transfer.
-
Investment businesses generally do not qualify.
-
Ongoing review is essential to ensure assets continue to qualify or to plan appropriately if they are sold.