Business property relief can allow investors with shares in certain companies to be completely void of paying inheritance tax.
Speaking during a roundtable event hosted by research house Intelligent Partnership, advisers said they wanted evidence of more support from the government when it comes to business property relief (BPR).
Neil Cole, director of wealth planning product development and management at UBS, said: “At the moment there is always a nagging doubt that at some point the government will take a look at the amounts going into BPR, decide it is too much and make a change.
“There is a lot of support for venture capital trusts and enterprise investment schemes, and I’d like to see that replicated for business property relief.”
Christopher Green, partner at Christopher Green Wealth Management, which is part of St James’s Place, agreed the government should “stop keeping it a secret”.
“This is one tax relief that has been around for a while which hasn’t scratched the surface of the mass market.”
Mr Green said that while very few clients have heard of business property relief, when he has introduced the initiative to them and explained the benefits, they have reacted very positively.
There is always a nagging doubt that at some point the government will make a change. Neil ColeGuy Tolhurst, managing director at Intelligent Partnership, pointed out that BPR is one of the smallest inheritance reliefs claimed by estates, and is dwarfed by the nil-rate band.
“It is not a big drain on HM Treasury and in fact - as a relief that encourages investment into smaller companies - BPR could ultimately be a net contributor to the public purse through the taxes those firms and their employees pay,” he explained.
In this year’s Budget, the former chancellor George Osborne announced there would be an extension of entrepreneur’s relief to include BPR qualifying investments.
Intelligent Partnership, which focuses on training advisers in alternative investments, has also published a report looking specifically at business property relief.
According to the report, which consulted 120 advisers, IFAs wanted to see the government adopt an assurance process for business property relief, similar to that offered for Enterprise Investment Schemes.
The advance assurance procedure allows companies to submit details of their business model and their plans to make money to HM Revenue & Customs before issuing shares, so that it can be decided whether shares issued from that company are likely to qualify for tax relief.
Business property relief is currently retrospective, meaning the deceased’s estate applies for the relief without the guarantee they will qualify to benefit from the tax perk.
However, Matthew Harris, independent financial adviser at Dalbeath Financial Planning, disputed the comments, and said “plenty” of small business owners use BPR to avoid inheritence tax on their businesses when they die.
He pointed out that investors can also use Aim-listed shares which benefit from a 50 per cent tax break through BPR, provided they have held the shares two years prior to death.
Mr Harris said: “We don’t recommend that as a strategy to many people because these are very high risk investments and there is no point saving 40 per cent inheritance tax if you lose all of your investment.
“As such, I would expect, and hope, that as an inheritance tax planning tool BPR remains a niche approach, suitable only for highly sophisticated and wealthy investors.
“The mass market interest in it should only ever come from small business owners.”
katherine.denham@ft.com
