Agriculture Tax Relief

AGRICULTURAL PROPERTY RELIEF (APR)

[WITH IMPLICATIONS FOR BUSINESS PROPERTY RELIEF (BPR) AND ENTREPRENEUR’S RELIEF (ER)]

What is agricultural property relief?

What is agricultural property relief? If you own part or all of a farm then you can pass on some agricultural property including land and working buildings without paying much – or any – inheritance tax (also known as IHT) on it. That could easily save you, or those close to you, hundreds of thousands of pounds.

APR can be complex, and this is where it is useful to harness the knowledge of professionals with specific experience in Will, Trust and Estate Planning for farmers. Of course it is useful that Goodwills understand the Inheritance Tax Act (1984) in the same way that you know farming. But this page outlines the most important facts.

You Don’t Need to Buy the Farm!

This tax-break can be after your death, if the inheritance is mentioned in a will, so it would then be tied to a bequest. But it can also be a tax-break during your lifetime if you choose to pass it as a gift to an individual or even into Trust.

Importantly APR is available to the owner whether that owner farms the land or has a tenant or tenants do so instead. But as the transferor you must have been the owner for at least 2 years prior to your death or the transfer.

What is APR Worth?

How much is APR worth? APR is either 50% or 100% of the agricultural value (not the market value or the development value, so what the property would be worth if it could only ever be used as a farm). You’d need to speak to a local land agent or land valuer to settle on the sum involved. Goodwills are also able to help advise when it comes to the valuation itself.

The 50% applies if the land is currently let out, was let out before 1st September 1995, and the lease for that let has still 2 years to run before your own intended transfer. Otherwise the 100% applies. This may mean that, if your land was let before 1st September 1995 and the lease is running down towards 2 years, you might need to take early action in order to ensure you benefit from APR. If you’re in any doubt, then contact us and we’ll be able to assist.

What Farm Assets Are Covered by APR?

The agricultural property may be land that is used to grow crops. Or pasture that is used to rear animals intensively. Stud farms for breeding and rearing horses, and grazing, would also qualify. As would trees that are planted and harvested at least once a decade i.e. they are short-rotation coppices. It even covers the value of the milk quota associated with the land, as well as some shares and securities. (There is more. But we are limited here by space. Yet Goodwills will be able to rattle off a list if you speak with us.) Often APR will also apply to residential buildings e.g. farmhouses that are clearly occupied by still-active farmworkers. But HMRC is a little vague on this! Likewise there is some latitude on farm cottages given the possible occupants and their relationships with the land.

Which Agricultural Assets Are Not Covered by APR?

What APR won’t cover is farm equipment, machinery, livestock harvested crops and derelict buildings. (Again this is not an exclusive list because we’re limited by space. Yet Goodwills will be able to rattle off a list if you speak with us.)

Where Can You Find Out More About APR?

You can find out more on Agricultural Property Relief at Goodwills though the government website will tell you a lot at www.gov.uk/guidance/agricultural-relief-on-inheritance-tax. It also lets you work out whether assets in an estate qualify for APR and the rate at which it is due. If you want some advice or a fixed-price quote then you can call Goodwills on 0345 222 0022 or email us on info@goodwills.net.

Why Did We Mention Business Property Relief (BPR) and Entrepreneur’s Relief (ER)?

Agricultural Property Relief sometimes ties in with Business Property Relief (BPR) and Entrepreneur’s Relief (ER).

Business Property Relief (BPR) in Brief

Business Property Relief (BPR) is also defined by the Inheritance Tax Act (1984). Like APR it can mean the avoidance of 50% or 100% of inheritance tax (IHT) using the market value. And it might be relevant to farm-owners because it spans, for example, machinery. (Remember that APR did not!)

But the situation here is enormously complex, and legitimacy depends very much on the timing of transfer / death. If these are ‘fluffed’ then HMRC can investigate the matter and call in all of the paperwork then void the claim, since entitlement to Business Property Relief (BPR) is occasionally abused and that triggers tax-avoidance alarm-bells. In particular what the HMRC do not like is to see BPR claimed on business property that is promptly sold on to a 3rd party. Or the fudging of market value. They might quite rightly perceive that BPR is being harnessed to release cash, and it’s not designed for that purpose.

Again BPR can be complex. But this page outlines the most important facts.

Where Can You Find Out More About BPR?

You can find out more on Business Property Relief at Goodwills (www.goodwills.net), although the government website will tell you a lot at www.gov.uk/business-relief-inheritance-tax. It lets you see which assets qualify for BPR and the rate at which it is due.

If you want some advice or a fixed-price quote, and it is useful that Goodwills understand the Inheritance Tax Act (1984) in the same way that you know farming, then you can call Goodwills on 0345 222 0022 or email us on info@goodwills.net. Entrepreneur’s Relief (ER) in Brief

Lastly here we should mention Entrepreneur’s Relief (ER). Entrepreneurs selling their qualifying assets can claim a lifetime allowance of £10m in gains to be taxed at just 10% if they have at least 5% of the shares and have been an employee or director for at least a year but after 5th April 2013. So Entrepreneur’s Relief can save fortunes.

Further details are available on the government website at www.gov.uk/entrepreneurs-relief. Should you want some advice or a fixed-price quote then you can call Goodwills on 0345 222 0022 or email us on info@goodwills.net.

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