How does surplus cash in a business affect Business Relief qualification?
Exploring how a build-up of cash within a business can impact the inheritance tax relief available and potential planning ideas
Who may benefit from a corporate estate planning service?
How can a corporate estate planning service work?
A company’s surplus cash can be deployed into trading activities, with the aim of reinstating its BR qualification status.
Understanding if a company qualifies for Business Relief
What types of companies qualify for BR?
Determining whether a company qualifies for BR can be complex and we recommend seeking professional tax advice.
It is important to note the following are excluded trades for BR purposes: mainly dealing in securities, stocks or shares, land or buildings, or in making or holding investments. Find out more about what types of companies qualify for BR here on gov.uk.
‘Wholly or mainly’ trading rule
To qualify for BR, a company must be mainly trading – meaning more than 50% of its activities relate to trading rather than investment.
Once this threshold is met, the extent of relief depends on whether the company holds any non-trading (excepted) assets – such as surplus cash or investment property. These assets can reduce the value of the business that will qualify for BR.
For example: if 20% of the company’s value is tied to an excepted asset, then 20% of the shares may not qualify, as shown in the example below.
There are exceptions. If cash is held for trading purposes – for example, to fund future growth of the business or manage working capital – it may still qualify for relief.
