Inheritance tax is a tax charge of 40 per cent on the estate of the deceased; where the value of the estate exceeds £285,000. It is payable six months after the end of the month in which the death occurs. An instalment option is available (on business assets and land) over a ten year period. Interest is payable on overdue tax at 4 per cent (cheap borrowing!)

The estate is liable to Inheritance Tax on the excess of the aggregate of all of the property to which the deceased was beneficially entitled immediately before his / her death.

Certain relief's are available and this weeks article deals with Business Property relief.

BUSINESS PROPERTY RELIEF

With Inheritance Tax planning increasingly hampered by anti-avoidance legislation, making the most of available relief's and exemptions is essential. In this context, business property relief is particularly important, not only because it provides relief at 100% but also because the scope of the relief is so wide.

Business Property Relief reduces the taxable value of a transfer of relevant business property by either 100% or 50%. The 100% rate applies to businesses (sole traders), interest in business (i.e. partnerships) and to shares in an unquoted company.

The 50 per cent rate applies to a controlling holding of shares is a quoted trading company. The transferor must have owned the property throughout the previous two-year period. Property will not be relevant business property, if the property consists wholly or mainly of dealing in securities, stocks or shares or buildings. If the transferor dies within seven years of making the transfer of such qualifying relevant Business Property, relief will be denied (i.e. it will come within the charge to Inheritance tax), only if the beneficiary has sold it and not reinvested the sale proceeds in suitable replacement property.

The above article is prepared for guidance only. It is not possible to cover all aspects of this area of taxation in a single article. The article is not intended to give guidance on individual cases. No responsibility can be accepted for any action taken, without contacting us before acting on any information contained in the article.

Shannon Associates & Co are a firm of Chartered Certified Accountants, Registered Auditors and Taxation Advisers (UK And ROI), based at 11 Mill Street, Irvinestown, Co. Fermanagh, BT94 1GR. Tel 028 6862 8327/ 8394. The firm advises on both UK and ROI business and taxation issues. Its principal Marion Shannon is a fully qualified Accountant and Registered Auditor.