ACCA Advanced Taxation (ATX) Practice Exam

Under which condition can any remaining value not covered by APR still be subject to Business Property Relief (BPR)?

1. If farmed by a tenant

2. If farmed by the owner and BPR conditions are met

3. If farmed by an unrelated party

4. If farmed by a corporation

The correct answer is: If farmed by the owner and BPR conditions are met

Business Property Relief (BPR) is designed to reduce the inheritance tax liability on qualifying business assets. In scenarios where the owner actively farms the property, they can benefit from BPR, provided that specific criteria are met, such as using the property for business purposes for a significant portion of the ownership period. When the property is farmed by the owner, it enhances the legitimacy of the business use, indicating that the property is actively generating income and being used in a trading capacity. In this state, if there is any remaining value not covered by Agricultural Property Relief (APR) after determining the value of agricultural assets, that value may still be eligible for BPR. This combination allows for a comprehensive tax relief approach, seeking to alleviate the tax burden on family businesses and family farms. The other scenarios presented do not offer the same level of qualification for BPR. For instance, if the property is farmed by a tenant, it usually does not meet the active usage requirement needed for BPR as it typically falls under different ownership structures and motivations. Similarly, properties farmed by unrelated parties or corporations may not establish the direct connection necessary for BPR since those relationships do not typically signify the same active engagement by the owner in the business.