ACCA Advanced Taxation (ATX) Practice Exam

What type of business property attracts 100% relief for Business Property Relief (BPR)?

1. Quoted shares held for more than 2 years

2. Unincorporated businesses

3. Fixed assets of a publicly listed company

4. Real estate investments

The correct answer is: Unincorporated businesses

Business Property Relief (BPR) is designed to reduce the value of a business for inheritance tax purposes, encouraging business continuity and investment. To attract 100% relief under BPR, the asset must generally be used in the course of an unincorporated business, meaning an entity that is not registered as a corporation. Unincorporated businesses include sole traders and partnerships, where the business assets are actively used for trading purposes. This relief recognizes the operational challenges faced by such businesses, allowing them to pass on their assets without a significant tax burden upon the owner’s death. In contrast, quoted shares, fixed assets of publicly listed companies, and real estate investments typically do not qualify for the same level of relief. Quoted shares and fixed assets of a publicly listed company attract different rates of relief, often resting at 0% for quoted shares on the stock market, with real estate investments not qualifying for 100% relief as they do not contribute actively to a trading business in the same way that unincorporated business assets do. Therefore, unincorporated businesses are distinctly recognized for the full 100% BPR, promoting a favorable environment for small businesses and partnerships.