Advanced Taxation (UK) · Inheritance tax: the use of exemptions and reliefs in deferring and minimising inheritance tax liabilities

Business Property Relief and Agricultural Property Relief

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%. You must check the asset type, the two-year ownership test, excepted assets and, for gifts, the conditions at death. Apply APR first, then BPR to any balance.

Understand Business and Agricultural Property Reliefs

Inheritance tax can force a family to sell a business or farm to pay the bill. BPR and APR exist to stop that. They reduce the value transferred by a percentage, so little or no tax is charged on qualifying assets. The relief applies to lifetime transfers and to the death estate.

BPR applies to relevant business property. At 100% this covers a sole trader's business, a partner's interest in a partnership, and shares in an unquoted company (including AIM shares), whatever the size of the holding. At 50% it covers quoted shares giving the transferor control (more than 50% of votes), and land, buildings or machinery owned personally but used in a company the transferor controls or in a partnership in which they are a partner.

The business must not consist wholly or mainly of dealing in securities, stocks, shares, land or buildings, or of making or holding investments. Property letting is therefore normally excluded. Assets in a company that are not used mainly for the business in the previous two years, and are not needed for future use, are excepted assets. They get no relief. A binding contract for sale at the time of the transfer also removes relief.

APR applies to the agricultural value of agricultural property. That is the value as if the land could only ever be used for farming. Any extra value, such as development value, is outside APR. Agricultural property includes agricultural land and pasture, certain woodland and buildings used for intensive rearing, and farmhouses of appropriate character. APR is 100% if the transferor has the right to vacant possession within 12 months, or the land is let under a tenancy starting on or after 1 September 1995. Otherwise it is 50%.

Both reliefs need a minimum period of ownership, normally two years. For APR the land must have been occupied by the transferor for agriculture for two years, or owned for seven years and occupied for agriculture by someone for that time. For lifetime gifts, the relief is kept only if the donee still owns the property, and it still qualifies in their hands, when the donor dies within seven years. The donor's death is the key date for this test.

The tax tables give the nil rate band (£325,000), lifetime rate (20%) and death rate (40%). They do not give BPR or APR rules, so you must learn those. Recent reform proposals would limit 100% relief for BPR and APR to a combined £1 million allowance. The tables you are given do not contain that figure. Only apply it if the question tells you to or ACCA's examinable documents for your sitting include it.

Key rules to remember

BPR rate: 100%: Business or business interest; unquoted shares (any holding, including AIM) = 100%; Applies to a sole trader's business and a partner's share of a partnership.
BPR rate: 50%: Quoted shares with control; land, buildings and machinery used in a controlled company or the transferor's partnership = 50%; Control means more than 50% of the votes. No control means no relief on personally owned assets used by the company.
APR rate: APR = 100% (vacant possession within 12 months, or tenancy starting on or after 1 September 1995) or 50% (otherwise), applied to agricultural value; Relief is on agricultural value only, not market value.
Ownership period: Normally owned for at least 2 years before the transfer; Replacement property can qualify if the total period of ownership of the old and new property is at least two years in the five years before the transfer. The APR occupation tests also apply.
Excepted assets (shares): Relief on shares is broadly restricted to the proportion of company value attributable to business assets: business assets ÷ (business assets + excepted assets); Use this proportion when a company holds surplus cash or investments. Check the figures given in the question.
Order of reliefs: APR on agricultural value first, then BPR on the balance of value if it qualifies; You can never claim both reliefs on the same value.
Lifetime gifts: conditions at death: Donee must still own the property (or qualifying replacement) at the donor's death, and it must still qualify; Failure loses relief on a PET or CLT that becomes chargeable because of death within seven years.
IHT rates from the tables: Nil rate band £325,000; lifetime rate 20%; death rate 40%; Apply to the value left after BPR and APR.

How to solve Business and Agricultural Property Reliefs questions

Use the same order every time. It stops you missing a condition and loses no marks on layout.

1List each asset transferred, with its value, who owned it and who received it.
2Decide whether each asset is agricultural property, relevant business property, or neither. Note the business type (trading or investment).
3Check the ownership test for each asset: two years, or the replacement-property rule. For APR, check the occupation test.
4Look for traps: excepted assets, a binding contract for sale, a holding with no control, or an investment business.
5Work out the rate: 100% or 50% for BPR; 100% or 50% for APR depending on vacant possession or tenancy date. Apply APR to agricultural value first, then BPR to any balance.
6For a lifetime gift, check the donee's position at the donor's death if death occurs within seven years.
7Deduct the relief from the value transferred, then apply nil rate band and the correct rate (20% lifetime, 40% death). State your assumptions and the reason relief is given or denied.

Quickest way: Asset-by-asset relief grid

When to use it: Use this when the question lists several assets and you are short of time.

Write each asset in a row: asset, value, qualifies?, rate, relief.
Mark each row with one reason: 100% unquoted shares, 50% land used by controlled company, no relief investment, and so on.
Cross out any asset that fails ownership or is an excepted asset.
Total the relief, subtract from the estate or transfer, then apply the nil rate band and rate.

Common mistakes in Business and Agricultural Property Reliefs

Giving 50% BPR on land owned by the transferor but used by a company they do not control.
Students remember that land used in a company gets 50% and forget the control condition.
Fix: Check the shareholding first. Without more than 50% of the votes, no relief applies to personally owned assets used by the company.
Claiming APR on full market value.
The question gives one value and students apply the percentage to it.
Fix: Find the agricultural value. Only that part gets APR. Test the balance for BPR.
Giving BPR on a property letting or investment business.
Students see 'business' and assume relief is available.
Fix: Check whether the business wholly or mainly deals in or holds land, shares or other investments. If so, no BPR.
Ignoring the two-year ownership period or the replacement-property rule.
Students focus on the type of asset and forget the dates.
Fix: Compare the acquisition date with the transfer date every time. If the asset replaced another, add the periods.
Forgetting the conditions at death for a lifetime gift.
Students stop at the date of the gift.
Fix: If the donor dies within seven years, ask if the donee still owns the property, or a qualifying replacement, and whether it still qualifies. If not, relief is lost.
Giving 100% relief on whole company shares that hold surplus cash.
Unquoted shares are automatically 100% in the student's mind.
Fix: Test for excepted assets. Reduce the relief to the proportion of company value that relates to business assets.

Worked examples

Example 1

Ben died owning 60% of the shares in Oak Ltd, an unquoted trading company, held since 2010. The shares were worth £900,000. He also owned a factory worth £400,000 personally, used by Oak Ltd since 2010. He owned a house worth £500,000 and had £300,000 in cash. Everything passes to his son. Assume no earlier transfers and ignore the residence nil rate band. Calculate the IHT payable on death.

Show the solution

Estate: shares £900,000 + factory £400,000 + house £500,000 + cash £300,000 = £2,100,000.
Shares: unquoted trading company, owned more than two years, relief 100%. BPR = £900,000.
Factory: used by a company Ben controls (60%), owned more than two years, relief 50%. BPR = £400,000 × 50% = £200,000.
Total BPR = £900,000 + £200,000 = £1,100,000.
Chargeable estate = £2,100,000 − £1,100,000 = £1,000,000.
Less nil rate band £325,000 = £675,000 taxable at 40% = £270,000.

Answer: IHT payable on death is £270,000.

Example 2

Ravi died owning agricultural land let under a tenancy that started in 1990. Market value is £500,000 and agricultural value is £400,000. He had owned it for 12 years. He also held £200,000 in cash. Everything passes to his niece. Assume no earlier transfers and ignore the residence nil rate band. Calculate the IHT payable.

Show the solution

Tenancy began before 1 September 1995 and vacant possession is not available within 12 months, so APR is 50%.
APR applies to agricultural value only: £400,000 × 50% = £200,000.
The balance of the land value is £500,000 − £400,000 = £100,000. Letting land is an investment, so BPR is not available. The remaining £200,000 of the agricultural value is also without relief. Chargeable value of land = £500,000 − £200,000 = £300,000.
Add cash: £300,000 + £200,000 = £500,000.
Less nil rate band £325,000 = £175,000 taxable.
IHT at 40% = £175,000 × 40% = £70,000.

Answer: IHT payable on death is £70,000.

Exam tips

Write the rate and the reason beside each asset (for example 50%: land used by controlled company). Markers give credit for each stated condition.
Always check ownership dates against the transfer date. Questions often hide a recent purchase or replacement.
Look at what the company or business actually does. Investment and letting activities are a frequent trap.
For a lifetime gift followed by early death, comment on the donee's ownership at death. This is the usual way the examiner links BPR and APR to PETs and CLTs.
Do not apply a £1 million cap unless the question gives the figure or the examinable documents for your sitting include it. The tax tables provided do not list it.

Practice questions from Inheritance tax: the use of exemptions and reliefs in deferring and minimising inheritance tax liabilities

Business and Agricultural Property Reliefs: frequently asked questions

What are the conditions for business property relief in ATX-UK?

The asset must be relevant business property, such as a business, a partnership interest or shares. The business must not be mainly investment or dealing in securities or land. The asset must normally have been owned for two years, must not be an excepted asset, and must not be subject to a binding contract for sale.

What is the difference between APR and BPR?

APR covers agricultural property, but only the agricultural value, at 100% or 50%. BPR covers business assets at 100% or 50% depending on the type. If both could apply, you give APR first and then BPR on any balance that qualifies.

How do I calculate BPR on shares?

Identify the type of shares and holding. Unquoted shares get 100%. Quoted shares with control get 50%. Multiply the value by the rate. If the company holds excepted assets, reduce the relief to the business-asset proportion of company value.

Is there a £1 million cap on APR and BPR in the exam?

The tax tables you are given do not include a £1 million figure. Only apply a cap if the question gives it or the ACCA examinable documents for your sitting say it is examinable. Check ACCA's current guidance before your exam.