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ACCA Strategic Professional · Advanced Taxation (UK) · Inheritance tax: transfers to and from trusts and property within trusts

Marcus transfers a trading business he has owned for ten years into a discretionary trust. The transfer is a chargeable lifetime transfer. Which statement best describes the effect of business property relief (BPR) on the transfer?

Business property relief can apply to a transfer of a trading business into a discretionary trust. Relief at 100% reduces the value transferred if the business is a trading one and the two-year ownership test is met. It is not limited to death transfers.

  1. ABPR at 100% can reduce the value transferred, provided the business is a trading business and the ownership conditions are metCorrect
  2. BBPR is never available on transfers into trusts, only on transfers on death
  3. CBPR is available only if the trustees sell the business within two years
  4. DBPR applies only to the extent the transfer exceeds the nil rate band

Explanation

Business property relief applies to lifetime chargeable transfers as well as to transfers on death. A trading business owned for at least two years qualifies for relief at 100%, which reduces the value transferred. The relief does not depend on the nil rate band or on a sale by the trustees.

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