Following the recent Balfour case in Scotland, Paul Dallyn put forward an argument to the Capital Taxes Office for a Let farm cottage to have Business Property Relief for Inheritance Tax purposes.
The cottage was a traditional stone cottage attached to the farmhouse, occupied by an ex-farm employee who had been made redundant in 1999. He had a secured tenancy under the Rent (Agriculture) Act 1990 and paid a rent fixed by the Rent Officer. Had he remained employed, the cottage would certainly have been eligible for 100% Agricultural Property Relief, but it had to be accepted it was no longer eligible as it was not being used for agricultural purposes.
The rent was paid into a Building Society account which could be proved to be used from time to time to pay for major farm maintenance and reinvestment.
It was argued that this cottage was being retained for possible future use by a farm employee and the rent used for business purposes. As such, it was an asset of the business and should therefore be eligible for Business Relief.
The value of the property, subject to the secure tenancy of the ex-employee, had been agreed with the District Valuer in the sum of £125,000. As it was a taxable estate the Inheritance Tax on this cottage, at 40%, was potentially £50,000.
The Capital Taxes Office has now agreed that the property is eligible for Business Property Relief with a substantial saving on the Inheritance Tax to be paid, much to the pleasure of the beneficiaries.
This result emphasises the importance of giving valuation/probate instructions to agents and valuers who are experienced in the complexities of the legislation and who are up to date with the changes brought about by case law.
Further information from Paul Dallyn 01258 472244