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The Great Balancing Act

You may hear your friends or advisors mention Balfour.  This refers to a landmark case where there was a successful case for Business Property Relief (BPR) by the executors of the Earl of Balfour's estate even though it contained within it assets that on their own would not have attracted the relief.

In essence, this Inheritance Tax Relief (IHT) available to business assets has the impact of reducing the value of that asset by 100% so that no IHT is paid, this asset can be an interest in a partnership or some shares in a farming company.

The major victory for this estate was the inclusion of the typically 'non agricultural' assets such as the leased cottages, even in this case where they were financially reported under their own set of accounts and had their own VAT registration.  The victory came from the fact that the Earl of Balfour operated the two enterprises as one composite business as was heavily involved in both the property management and farming such that the whole business passed for BPR.

The language of this relief, in legislation, means that HMRC needed to demonstrate that the business was 'wholly or mainly that of making investments, i.e. passively receiving income from investment assets (like the cottages) and if they cannot, the BPR claim will succeed.

At Glents we will keep track of your position and weigh up how we feel a claim would fall.  We can never give certainty as HMRC will look at a combination of factors such as asset valueprofits, turnover and time spent on the holding.  An overall judgement will be made based on your own unique case but we will advise if we can see anything causing an issue.

Keep in mind though, this is a Business Property Relief consideration, and as farmers you should still have Agricultural Property Relief (APR).

If you would like to discuss this further, please contact us.

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