Advanced Taxation (UK) · Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death

Business Property Relief and Agricultural Property Relief for ATX

Updated 11 October 2026 · Fact-checked

Business property relief (BPR) and agricultural property relief (APR) cut the value of qualifying assets for inheritance tax, by 100% or 50%, on lifetime transfers and on death. You need the right asset type, a minimum ownership period, and for lifetime gifts the donee must still hold the asset if the donor dies within seven years.

Understand Business and Agricultural Property Reliefs

Inheritance tax can force a family to sell a business or a farm to pay the bill. BPR and APR exist to stop that. They reduce the value transferred, before the nil rate band and tax rates are applied. The relief is on the value of the asset, not on the tax.

BPR applies to relevant business property. 100% relief covers a business or an interest in a business (sole trader or partner) and unquoted shares, including AIM shares. 50% relief covers a controlling holding (more than 50% of the votes) in quoted shares, and land, buildings, plant or machinery owned personally but used by the transferor's controlled company or by a partnership in which the transferor is a partner.

The property must normally have been owned for at least two years before the transfer. A replacement asset can qualify if the combined ownership is two of the last five years. A business that is wholly or mainly dealing in securities, land or buildings, or making or holding investments, does not qualify. No relief is given if there is a binding contract for sale at the time of transfer. Non-controlling quoted shares get no BPR.

Excepted assets are assets not used wholly or mainly for the business in the previous two years, and not needed for future use. Relief is denied on their value. Think of cash piles and spare investments inside a trading company.

APR applies only to the agricultural value of agricultural property, meaning its value if it could only be used for farming. Any extra value, such as development value, gets no APR. It gets 100% where the transferor farms the land (or a company they control does) and has done so for two years, or where the land has been owned for seven years and farmed by someone for that period. It gets 50% in other cases, such as some older tenancies. A farmhouse qualifies only if it is of a character appropriate to the farm, and only on its agricultural value. Any excess value may qualify for BPR if it is part of a farming business that qualifies.

The tax tables you are given show the nil rate band of £325,000, the lifetime rate of 20%, the death rate of 40% and the taper relief bands. They do not set out the BPR or APR conditions, so you must learn those. Recent reform has introduced a cap on the value that attracts 100% relief. The tax tables given to you do not include a cap figure. Check ACCA's current examinable documents, and use a cap only where the question gives you the figure and tells you to apply it.

Key rules to remember

BPR rates: 100% or 50% of the value of relevant business property; 100%: business or partnership interest, unquoted shares. 50%: controlling quoted shares; land, buildings, plant and machinery used by controlled company or partnership.
APR rates: 100% or 50% of the agricultural value only; Relief is not given on development or hold value. 100% where the owner farms for two years or owns and has it farmed for seven years. 50% in other cases.
Minimum ownership: BPR: 2 years. APR: 2 years if owner-occupied, 7 years if let and farmed by another; Replacement property: combined ownership must be 2 of the last 5 years for BPR.
Excepted assets: Qualifying value = value of business − value attributable to excepted assets; Excepted assets are not used wholly or mainly for the business for two years, and not needed for future use.
Clawback condition for lifetime transfers: Relief survives only if, at the earlier of donor's death or donee's death, the donee still owns the asset (or a qualifying replacement acquired within 3 years) and it still qualifies; Applies only where the donor dies within seven years of the gift. If the condition fails, the relief is lost and the transfer is taxed on its full value.
IHT rates from the tax tables: Nil rate band £325,000; lifetime rate 20%; death rate 40%; Apply the reliefs to value first, then use the nil rate band. Taper relief reduces the tax, not the value.

How to solve Business and Agricultural Property Reliefs questions

Work on the value of each asset first, then compute tax. Do it asset by asset so you earn marks for each decision.

1Identify each asset transferred and whether the transfer is lifetime or on death.
2Decide whether the asset is relevant business property or agricultural property. Check for excluded businesses, non-controlling quoted shares and a contract for sale.
3Test the ownership period: two years for BPR, and two or seven years for APR depending on occupation.
4Fix the rate: 100% or 50%. Restrict the base for excepted assets (BPR) or to agricultural value (APR).
5Deduct the relief from the value transferred, then apply other exemptions in the usual order.
6For a lifetime gift where the donor dies within seven years, test the clawback condition on the donee. If it fails, remove the relief.
7Compute tax using the nil rate band and rates from the tax tables. Apply taper relief to the tax if the gift is a chargeable transfer made more than three years before death and tax is due.
8State the advice in words: what qualifies, what does not, and any planning point such as keeping the asset until the seven years end.

Quickest way: Four-question check

When to use it: Use when a scenario lists several assets and you must quickly decide which get relief.

What is the asset? Trading business or unquoted shares are 100%. Controlling quoted shares or personally owned business assets are 50%. Investment businesses are nil.
Has it been held long enough? Two years for BPR. Check the seven-year rule for let farmland.
Is any of it excepted or non-agricultural? Strip out surplus cash, investments and development value.
Is it a lifetime gift? If the donor dies within seven years, check the donee still holds the asset and it still qualifies.

Common mistakes in Business and Agricultural Property Reliefs

Giving APR on the full market value of farmland.
Students see 'agricultural property' and apply relief to everything.
Fix: Split the value. APR applies to the agricultural value only. Test the excess for BPR as part of a farming business, otherwise it is fully taxable.
Giving 100% BPR on quoted shares.
Students remember the 100% rate and forget the quoted shares rule.
Fix: Unquoted shares (including AIM) get 100%. A controlling quoted holding gets 50%. A non-controlling quoted holding gets nothing.
Ignoring excepted assets in a trading company.
The company is trading, so students treat all its value as qualifying.
Fix: Look for surplus cash or investments not needed for the business. Remove the share of value attributable to them before applying relief.
Forgetting the clawback test on a PET or CLT.
Students apply relief at the time of the gift and stop.
Fix: If the donor dies within seven years, ask whether the donee still owned the asset, or a replacement, and whether it still qualified at that date. If not, remove the relief.
Applying taper relief to the value rather than the tax.
Students confuse the relief with reliefs that reduce value.
Fix: Compute the death tax on the gift, then reduce that tax by the taper percentage. Taper only helps where there is tax above the nil rate band.
Giving relief where the ownership period is not met or a sale contract exists.
Students skip the dates in the scenario.
Fix: Write down the acquisition date and the transfer date. Check for a binding contract for sale at the date of transfer, which removes relief.

Worked examples

Example 1

Ravi dies owning 80% of the shares in an unquoted trading company, bought six years ago and valued at £800,000. The company holds surplus investments not needed for the business, and the part of Ravi's share value attributable to them is £120,000. His other assets are a house worth £500,000 and cash of £100,000. There are no debts. Assume no residence nil rate band and no cap on relief. Compute the IHT on death.

Show the solution

Shares are unquoted, held over two years, in a trading company: 100% BPR on the qualifying part.
Excepted assets: the £120,000 attributable to surplus investments gets no relief. Qualifying value is £800,000 − £120,000 = £680,000.
BPR at 100% = £680,000. Chargeable value of shares = £800,000 − £680,000 = £120,000.
Taxable estate = £120,000 + £500,000 + £100,000 = £720,000.
Less nil rate band £325,000 = £395,000 taxable at 40%.
IHT = £395,000 × 40% = £158,000.

Answer: IHT on death is £158,000.

Example 2

Sunita gave farmland to her son in a PET. She had farmed it herself for ten years. Its market value was £900,000 and its agricultural value £400,000. The excess is development value with no BPR. Ignore annual exemptions and assume she made no earlier transfers. She died four years and six months later. Compute the IHT on the gift (a) if her son still owns and farms the land at her death, and (b) if he sold the land two years after the gift. Use the nil rate band and the taper relief bands from the tax tables.

Show the solution

Part (a): APR at 100% on agricultural value £400,000. The clawback condition is met because the son still owns and farms the land.
Chargeable PET = £900,000 − £400,000 = £500,000.
Less nil rate band £325,000 = £175,000 at 40% = £70,000.
Death is more than four but less than five years after the gift: taper relief is 40%. Tax = £70,000 × 60% = £42,000.
Part (b): the son sold the land before Sunita died, so the clawback condition fails and APR is lost.
Chargeable PET = £900,000. Less nil rate band £325,000 = £575,000 at 40% = £230,000.
Taper relief 40%: tax = £230,000 × 60% = £138,000.

Answer: (a) IHT is £42,000. (b) IHT is £138,000. Losing APR through the son's sale costs £96,000 of extra tax.

Exam tips

Write the rate, the ownership test and the asset type for each item. These are separate marks.
In scenarios, scan for dates, quoted or unquoted status, surplus cash and any contract for sale. They are usually planted deliberately.
For lifetime gifts, always state what happens if the donor dies within seven years and the donee has sold the asset.
Do not use a cap on 100% relief unless the question gives you the figure and tells you to. Say clearly what you assume.
Add a planning sentence for professional skills marks, for example advising a client to keep the gifted asset until seven years pass, or to hold surplus cash outside the company.

Practice questions from Inheritance tax: the liabilities arising on chargeable lifetime transfers and on death

Business and Agricultural Property Reliefs: frequently asked questions

What is the difference between 100% and 50% business property relief?

100% relief applies to a business or partnership interest and to unquoted shares. 50% relief applies to controlling quoted shareholdings, and to land, buildings, plant and machinery owned personally but used by the transferor's controlled company or partnership.

How long must I own an asset to claim BPR?

Generally two years before the transfer. A replacement asset can qualify if the combined ownership is two of the last five years. Different rules apply to inherited assets, so read the scenario closely.

Does APR cover the farmhouse?

Only if the farmhouse is of a character appropriate to the farming activity, and then only on its agricultural value. A house worth more than that has the excess taxed in full unless BPR applies.

How does clawback work on lifetime gifts?

If the donor dies within seven years of a PET or CLT, the relief survives only if the donee still owns the asset, or a qualifying replacement, at the earlier of the donor's death or the donee's death, and it still qualifies. Otherwise the gift is taxed without the relief.

Should I apply the relief before or after the nil rate band?

Before. BPR and APR reduce the value transferred. The nil rate band is then set against the remaining chargeable value, and taper relief reduces the resulting tax.