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Business Relief

A user-friendly guide to business relief

Let’s face it, taxes can be a difficult matter when it’s that time of year, but it gets even more complicated for businesses. Just like personal taxpayers, many businesses look for any claims or credits that may reduce their tax burden. More importantly, it takes a professional to help you sort out the legal jargon behind preparing your business taxes or claiming relief. Business relief reduces the value of a business or its assets when establishing how much business tax has to be paid. The following guide outlines some of the main details of business relief to help you understand how it applies to your business.

The facts on business relief and who is eligible

If you own a business or a share of the business, it’s included in the estate for inheritance tax purposes. Businesses can get Business relief on either 50% or 100% on some of the estate’s business assets. These assets can be passed on in one of two ways that include:

• While the owner is still living or

• When the owner is deceased

In the instance that’s the owner is still living, someone can give away Business property or assets. However, the recipient of the property or assets must keep them until the death of the donor if they want to keep the relief. Business relief applies to an individual still living as follows:

• Replace the property or assets (like business machinery) if it’s used for business

• The donor must have owned the assets or property from at least two years before it was received by the recipient

More importantly, a gift that was made more than seven years before the donor’s death does not qualify for business relief or count towards the estate. In fact, you may have to pay Capital gains or income tax if the recipient pays, sells, exchanges or gives away the assets or property.

What qualifies for business relief?

You can get 100% Business Relief on:

• Interest or business in a business

• Shares in a company that isn’t listed

You can get 50% business relief on:

• Shares, assets, or property owned with a partner

• Shares with more than 50% of the voting rights in a company

• Building, land, or machinery held in trust that has benefit rights

Who qualifies for business relief?

Anyone that inherits or is gifted Business property qualifies for business relief.

If you’re eligible, you can apply for various types of business relief that include:

• Small business rate relief

• Charitable rate relief

• Hardship relief

• Retail discount

• Rural rate relief

• Enterprise rate relief

Your council automatically qualifies exempted and empty building relief along with transitional relief. You may qualify for temporary relief if your business is impacted by severe local disruption (i.e building, flooding, roadworks). In fact, rate relief for business relief purposes is handled differently in Wales, Northern Ireland, and Scotland.

Individuals can claim relief on:

• Machinery

• Unlisted shares

• Land and buildings

How to apply for business relief

An administrator or executive of the will can claim business relief when estimating the value of an estate. Use forms, IHT400 (inheritance tax account) and schedule IHT413 (partnership or business interests and assets) together “ if the deceased owned shares in a company, a business or part of a business – or an asset used in a business and you’re deducting business relief”. At 50% business relief, you must use the market value of assets of businesses.

Bottom line: The above-mentioned business relief information will help you make some key informed decisions about business relief. More importantly, it will help save money or enable you to reinvest in your business. Finally, it’s important to note that some business assets are not exempt from inheritance taxes.

If you’re interested in more details on business relief and how we can help, please feel free to telephone the office on 01507 527383 or contact mail@fhmanning.co.uk today !

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