BR Guide FINAL 20 Feb

7 6 THE IHT LANDSCAPE THE IHT LANDSCAPE The original purpose of the relief when it was introduced in 1976, was to prevent small businesses having to be broken up and sold to raise the funds required to pay the IHT liability when the business owner passed away. BR is a statutory relief, enshrined in law and has gone through various changes to its scope and developments of its rules. Managers who specialise in these investments began launching estate planning services in response to growing consumer demand. The first of these was launched in 1996 and that service continues today as TIME:CTC. Since then, the number of BR products has soared to offer a wide range of objectives, risk profiles and investment strategies. BR now also acts as an incentive to encourage investment into qualifying, unquoted small businesses which account for a large proportion of employment in the UK, and of course make a large contribution to the tax base. HMRC’s research report, The influence of Inheritance Tax reliefs and exemptions on estate planning and inheritances , published on the day of the Autumn 2017 budget, states, “Most instances of APR/BR being applied to assets appeared to be genuine and in keeping with policy objectives.” Alongside the many ordinary family businesses that qualify for the relief, there is a large and growing market for BR ‘products’ for investors. HM Treasury (HMT) estimates that at least £4 billion is invested via BR products. FINANCING GROWTH IN INNOVATIVE FIRMS CONSULTATION, HM TREASURY, AUGUST 2017 CUMULATIVE NUMBER OF OFFERS 1995 2000 2005 2010 2015 0 10 20 30 40 50 60 70 SOURCE: MICAP, SEPTEMBER 2017 1996 The 100% relief was extended to minority investors in a qualifying company. Fund managers started to build relevant share portfolios for individuals. 1976 2013 30% BR Relief established Rules changed so that the use of debt to acquire BR assets invalidates IHT mitigation 2014 100% BR Relief introduced 1992 0.5% stamp duty on shares traded on AIM was abolished 0.5% 50% BR Relief introduced 1987 AIM shares became eligible to be held in an ISA AIM Business Relief Timeline SOURCE: INTELLIGENT PARTNERSHIP SOURCE: HMRC, ESTIMATED COSTS OF TAX RELIEFS, JANUARY 2017 COST OF BR TO HMRC (Taking into account offset of income generated by small businesses which benefit from BR) 2012- 2013 2013- 2014 2014- 2015 2015- 2016 2016- 2017 550 560 570 580 590 600 610 620 630 640 £ MILLIONS The IHT Landscape