Business Property Relief

[markbruff@blueyonder]

My father has run a furnished holiday flat from half of his home for the last 20 years. He is in the process of selling half the house to my sister to live in, but continues to rent out his half of the property during the summer. I understand that this setup (the furnished holiday letting)entitles him to BPR for IHT purposes. Assuming this is the case, what is the tax position if he ceases trading? (The house is basically arranged as 2 semi detached bungalows, and he is selling 1 to my sister).
Thanks
Mark

[James Smith]

Mark,

If he ceases to trade then BPR will not be available on death, although it is permissible for a family member to effectively run the trade and still obtain the relief. Generally speaking if the strategy is to use BPR the family should arrange to ensure the business continues until the end.

Your Father should ensure he takes appropriate advise about the sale to your sister, from a CGT point of view and also from a IHT planning position. If you father is planning on moving out then by selling the property you may be pushing money "up" a generation when you have the opportunity of a gift or other transaction to reduce the size of your Father's estate. How relevant this is will of course depend on his other assets and total estate value.

Regards

James Smith
Chartered Accountant
www.jamesesmith.co.uk
01284 764436