Getting 100% Agricultural Property Relief on a tenanted farm

For owners of tenanted farmland, 50% Agricultural Property Relief (APR) is available on land subject to a tenancy granted before 1 September 1995. Only if the tenancy was granted on or after this date, does the land attract 100% relief.

Alistair Millar, agricultural lawyer at Tallents Solicitors in Southwell explains that as part of an estate planning and inheritance tax exercise, it could be worthwhile landowners reviewing older tenancies and holdings to see if 100% Agricultural Property Relief can be achieved.

Alistair says:

Much landlord and tenant law is complex and hard to understand. The rules relating to agricultural tenancies could be regulated by one of two acts depending on the start date of the tenancy so it makes good business sense for landlords to seek specific agricultural legal advice as there are potential pitfalls for the unwary.

The Agricultural Tenancies Act 1995 (“the Act”) introduced the concept of ‘Farm Business Tenancy’ to replace the old style Agricultural Holdings Act 1986 (AHA 1986). The Act was introduced to ensure that the relationship between landlord and tenant would be governed by the agreement between them but it also increased APR to 100%.

So, the potential positives for landowners to amend old tenancies to come under the Act are undeniable, but why should tenants agree to a surrender and re-grant of an older tenancy? Especially when AHA 1986 has many advantages for a tenant.

Says Alistair:

Prior to the introduction of the Act, all tenancies were governed by the AHA 1986 under which tenants enjoyed extensive security of tenure rights and rights of compensation upon quitting of the tenancy. Landlords should note that AHA 1986 will still continue to have practical implications for some time into the future and this is especially true when it comes to APR and inheritance tax implications.

However, it may be possible to create a new tenancy which will give the tenant all the advantages and securities he enjoys under AHA 1986 but which is a tenancy under the Act for the purposes of Agricultural Property Relief.

Alistair comments:

The surrendering and re-granting of a tenancy may have additional tax implications for the tenant which will need to be considered carefully by an experienced agricultural lawyer as the transactions may attract Capital Gains Tax and/or Stamp Duty Land Tax.

But with careful negotiations during the process and appropriate tax advice, a tenancy review could result in a positive outcome for everyone; continued security for the tenant and Agricultural Property Relief at 100% for the landowner.

 

For further advice, contact Alistair on 01636 813411.