The gate · Business Relief screening

Five properties is a portfolio.
Is it a business?

It is not the same question. Business Relief can take qualifying business assets out of Inheritance Tax altogether. Whether your property activity qualifies turns on one thing, and most people guess it wrong.

Before you start

The one thing it turns on

Business Relief is not available to a business that consists wholly or mainly of holding investments. That is the whole test, and “mainly” means more than half.

Letting property out is holding an investment. That is the starting position in law, and it is why straightforward buy-to-let – however large the portfolio, however hard you work at it – does not qualify. Twenty flats let on assured shorthold tenancies is twenty investments, not a trade.

What moves a property activity away from investment is what else you do. Services to occupiers. Development and sale. A genuine trade running alongside. The courts have looked at this repeatedly and the bar is high – considerably higher than most owners expect.

This screening asks about the shape of your activity, not the size of it. Scale does not help. A hundred tenancies is still a hundred investments.

Nine questions · about four minutes

The screening

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1. What does the business mainly do?

2. Roughly what share of turnover comes from rent alone, as opposed to services, sales or trading?

3. What services do occupiers actually receive, beyond the building itself?

4. How many hours a week does the business spend on work that is not collecting rent, arranging repairs or managing tenancies?

5. Does the business employ people, or engage contractors, for anything beyond repairs and letting agency?

6. In the last three years, has the business bought, developed or refurbished property with the intention of selling it on?

7. How is the business held?

8. Roughly what is the business worth, net of borrowing?

9. Has the business been owned and run in broadly its current form for at least two years?

DRAFT – UNSIGNED. This screening and the thresholds behind it are with our Chartered Tax Adviser for review and have not yet been approved for release. Treat the output as an illustration of how the test works, not as a position on your own affairs.

Important. This is a screening indication based on the answers you gave, not advice, and not a determination. Business Relief turns on the facts of a particular business judged in the round – something no set of nine questions can capture. Tax treatment depends on individual circumstances and legislation changes. All tax advice is provided in writing by a Chartered Tax Adviser who is a current member of the Chartered Institute of Taxation.

If the answer is “unlikely”

That is worth knowing too.

Most property owners who ask this question get the answer they did not want. It is not the end of the conversation – it is the beginning of a more useful one, because it rules out a whole set of assumptions and points at what is actually available to you.

There are other Reliefs, Exemptions and Allowances, and there are structures that separate ownership from control without relying on Business Relief at all.

Five properties is a portfolio.Is it a business?

The one thing it turns on

The screening

That is worth knowing too.

Five properties is a portfolio.
Is it a business?