It allows certain investments to be left to your beneficiaries free from inheritance tax.

BPR was introduced in the 1976 Finance Act.  It was created to allow small businesses to be passed down through generations without facing a large inheritance tax bill.

Over time, successive governments have recognised that tax breaks are the best way to encourage people to invest in trading businesses, regardless of whether they run them themselves. These incentives can compensate for some of the risks associated with investing in such companies.

Why hold shares in BPR-qualifying companies?

  • Faster inheritance tax exemption: Whereas making a gift means they take seven years before becoming exempt from IHT, investments in a BPR company are exempt after being held for just two years, provided the shares are held at the time of death.
  • Greater access and control: Unlike a gift, the investor retains control over the investment and can sell it if they need to. Money taken out of the investment however will no longer be exempt from inheritance tax.
  • Simplicity: Buying a BPR investment is relatively simple compared to setting up a trust as there are no complex legal structures.

What are the risks?
The value of a BPR investment will depend on the performance of the companies it invests in and you may get back less than you invest. Tax rules can change and investments in AIM-listed companies are likely to fall or rise more than shares on the Stock Exchange. There are however more products being introduced which focus on capital preservation and are primarily linked to the returns associated with renewable energy.

Choosing the right investment can be complicated which is why it is vital to seek advice from an independent adviser.

By Philip Harper  |  July 2020

The form has been submitted

Thank you for this confirmation to investment additional funds to your ISA. Your adviser will confirm the bank account to transfer the funds and a reference number. Once the top up has been applied to your tax-free investment account, the Client Support Team will confirm this and provide you with an updated valuation.