HMRC finding appears to vindicate use of APR and BPR in succession planning strategies, says Saffery Champness

Research commissioned by HMRC published in November appears favourably to reinforce the use of Agricultural Property Relief (APR) and Business Property Relief (BPR) in succession planning, experts have said.

Jamie Younger, a partner with UK top 20 Chartered Accountants Saffery Champness, a member of the firm’s Landed Estates and Rural Business Group, and based in their Edinburgh office, said: “The conclusions of this research are encouraging and would appear to demonstrate that APR and to a lesser extent BPR are being used for very good reasons, to keep businesses intact through succession and into future generations, and not as aggressive mechanisms to reduce inheritance tax (IHT).”

The research, entitled The influence of inheritance tax reliefs and exemptions on estate planning and inheritances, concluded that the objectives for the use of these reliefs was to avoid breaking up of estates or businesses and keep them as viable entities within families, and that minimising IHT liabilities was a secondary consideration. Most instances of applying APR and BPR appeared to be “genuine and in keeping with policy objectives”.

The reorganisation or restructuring of assets to minimise reliefs also appeared to be far more prevalent than the purchase of more assets such as AIM shares or land, to make use of such reliefs.

Mr Younger said that the report, however, did note that there was still a “limited understanding of IHT” and that many had misconceptions about how reliefs would apply to their estate. Many assumed that agricultural or business assets could qualify for 100 per cent relief and that “word of mouth” was the reason for either misunderstanding or a lack of understanding.

The use of Trusts to ensure that assets were managed in a specific way after death and to enable equal distribution of assets among beneficiaries was also noted.

Mr Younger added: “This report has, from the evidence it has gathered, clearly grasped that APR and BPR reliefs are critical, particularly for assets such as land-based businesses with a high sense of tradition, and that without them many businesses would need to be broken up and become unsustainable, or sold on death in order to pay the IHT bill.”