Inheritance Tax

Introduction

This chapter examines **Inheritance Tax** as it affects the business client, focusing on the single most important relief for the SQE1 Business Law and Practice syllabus: **Business Property Relief ('BPR')**. BPR reduces the **value transferred** by a transfer of value of **relevant business property** by either **50% or 100%**, and can substantially lower the Inheritance Tax due on a business or its assets. You will learn the **eligibility criteria**, the **categories of property** that attract 100% or 50% relief, and the **implications** of the relief for lifetime transfers and on death.

Assessment focus

For the SQE1 FLK1 assessment, Inheritance Tax is examined within the **Business Law and Practice** syllabus at a working level: you must be able to **identify** when Business Property Relief applies and to **calculate the effect** of the relevant rate of relief on a transfer. Questions are single best answer questions (SBAQs) set in **realistic client-based scenarios** in which a business owner makes a lifetime gift or dies owning business assets. You will be expected to **apply** the eligibility criteria (two-year ownership, trading rather than investment business) and the **50% / 100% categories** to the facts, rather than simply recall them. This is a closed-book assessment — ensure you can recall the criteria, the property categories and the relevant rates from memory.

Study tips

1) Memorise the **three eligibility criteria**: (i) the transferor owned the property for at least **two years**; (ii) the business is a **trading** business; (iii) it is **not** an investment business. 2) Learn the **100% category** (a business or interest in a business; **unquoted** shares) and the **50% category** (**quoted** shares giving the transferor **control** — more than 50%; land, buildings and machinery used in the company or partnership). 3) Remember the **lifetime transfer rule**: BPR can apply to lifetime transfers, but if the transferor **dies within seven years** the relief is **withdrawn unless** the recipient still owns the property. 4) Note that BPR may be **claimed alongside Agricultural Property Relief (APR)** but the **same value cannot be relieved twice**. 5) Remember the **reforms in force from 6 April 2026**: a **£2.5 million allowance** caps the **100%** rate (combined across BPR and APR), value above it attracts only **50%**, the allowance is **transferable between spouses**, and shares **not listed** on a recognised stock exchange (e.g. **AIM** shares) now attract **50%** rather than 100%. 6) Keep the statutory anchor in mind: **Inheritance Tax Act 1984, sections 103–114** (as amended by the Finance Act 2025).