Tax planning for farming families

Ashley Wallace-Cook, Wills, Trusts and Probate Partner at WSP Solicitors
Obtaining Agricultural Property Relief (APR) and Business Property Relief (BPR) from Inheritance Tax on farm assets is not a foregone conclusion, but a review of the farming business and its ownership structure may do much to improve the position. Agricultural solicitors regularly see cases where IHT relief is being lost unnecessarily due to a lack of correct planning.

 

Common problems affecting availability of relief include the arrangements concerning the ownership structure of the land and property used in the farming business, the nature of agreements on which farmed land is let, a lack of record keeping and formal documentary evidence and the dwindling activities of elderly farmers, particularly where they remain in occupation of the farmhouse.

 

For land to qualify for APR it must be owned by a farmer for at least 2 years if he is personally in occupation, but if land is let he must have owned it for at least 7 years to qualify for relief. APR may offer relief against the ‘agricultural value’ of land, but the market value for IHT purposes will almost always exceed agricultural value. BPR may offer an alternative which provides relief on the full market value (particularly crucial where land holds development potential, or ‘hope value’), but will only be available at the higher rate of 100% where the land is included on the balance sheet of the farming business. Land let on agricultural tenancies is likely to qualify for APR, but whether 50% or 100% relief can be obtained will depend on the type of tenancy in place and the tax payer’s ability to provide evidence of the arrangement.

 

All too often the first chance an agricultural solicitor has to assess the merits of a case for relief are once a farmer has passed away. This is often when emotions are running high, there’s uncertainty regarding the future of the business and the next generations rights, and most crucially, when it is too late to implement the plans and strategies which would have been able to maximise availability of reliefs.

 

Obtaining advice early and having a clear understanding of the practical and evidential requirements for relief can help guarantee the future security of the farm whilst providing reassurance and peace of mind for family members left behind to succeed.

 

For legal advice on tax planning for farming fmilies or any other agricultural matter please email ashleywallace-cook@wspsolicitors.com or call 01453 541940.

 

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