We have a client who operates a music record label business that would like to place some shares into trust as part of an IHT & succession planning exercise.
The question we have is whether a record label business would qualify for Business Property Relief.
The directors work fulltime in the business generating 4 revenue streams:
i) Back Catalogue - Digitalising an extensive back catalogue of popular artists, preparing artwork and videos which can then be uploaded onto YouTube. They also digitalise audio versions of back catalogue and upload to an aggregator, which then places them onto over 100 different platforms. They then get a share of the income that is generated from downloads, streaming and advertising.
ii) New Recordings – They record songs with new artists, and then do the same as the above (i.e. getting them turned into videos/audio files that are uploaded onto the platforms)
iii) Samples and licensing for films – Regular requests come through for this due to the artists involved. They arrange the deals and get paid accordingly.
iv) Publishing royalties from TV Channels and Radio.
They spend 80% of their time focusing on digitising the back catalogue and getting them uploaded, and that brings through 90% of the revenue.
The rest of their time is spent dealing with claims against the rights held, fighting legal cases, dealing with new artists, managing revenue and dealing with admin.
We recognise that any record label business or book publishing business will always have passive income as that is the nature of the businesses, but there is a reason why these businesses exist and add value to artists/authors – i.e. ability to maximise revenue streams, access to platforms/stores (online/physical), marketing knowledge and expertise for that industry, brand alignment, etc. – and they are able to assist artists with these services and therefore add value to the artists.
We want to be sure that this would not fall under “holding investments” (s105(3) IHTA 1984) – any case law on this matter seems to be related to land and property, which I am sceptical to use as precedence for this as they are considering both “land and buildings” and “holding of investments” at the same time.
We cannot find anything from our research which is categorical on the matter, and no case law regarding companies holding IP, which seems odd as there are so many book publishing and record label companies around.
Any help and guidance would be much appreciated.