No one can avoid death and taxes but if you could reduce your Inheritance Tax bill, wouldn’t you be interested in learning more?
Alistair Millar, partner at Tallents in Southwell, explains how certain agricultural properties could qualify for up to 100% Agricultural Property Relief.
Reliefs against inheritance tax are an important part of succession planning for farmers as they allow the maximum amount of assets to pass to the next generation. But there are several complicated qualifications that have to first be met to gain full agricultural property relief (APR).
APR is available for agricultural property transferred in life, on death, or if it has been put into trust, and it is potentially extremely valuable, particularly for those who qualify for 100% relief. However, it is frequently misunderstood and its loss can cause significant cash flow problems for the inheritor of the farm.
APR is available on the agricultural value of agricultural property and reduces the value transferred. However the current law is complicated so experienced legal advice should be regularly sought to ensure careful succession planning and that you are maximising your potential relief.
There are two primary qualifications that have to be met for property to gain APR: the property must be an agricultural property and be occupied for the purposes of agriculture.
However, as with most law, it’s not quite that simple.
On death inheritance tax is levied at 40% on that part of the value of the estate which exceeds £325,000. It is the market value of assets which is relevant when calculating Inheritance Tax and as agricultural land and buildings often fetch a premium price on the open market, many farming families who own any part of the land they farm could face a potential inheritance tax problem.
We do advise those involved in the farming industry to regularly review their affairs to ensure that their business is structured so as to take full advantage of the relief.
If there are proposals to change the way the business is run, to raise further capital or to diversify out of agriculture we would urge you to check before implementing any changes as to whether this will have any impact upon the availability of APR.
Although undoubtedly the intention of the legislation was to protect the integrity of farming businesses so that the next generations were not forced to sell up on a death to pay tax, you will only get the tax relief if you satisfy all the detailed conditions in the legislation. It is very easy for a genuine farming business to miss out on inheritance tax relief because a condition has not been satisfied.
Tallents can assist with APR queries and also advise on the availability of the associated relief known as Business Property Relief.