Two things in life are inevitable, death and taxes; the two often go hand in hand. Rural Surveyor Robyn Harper is an experienced valuer of rural property, she shares some tips on how Agricultural Property Relief can be utilised in tax planning
Inheritance tax charged at death against farming assets has the potential for large tax bills which could prevent farms from being passed down to the next generation. This is one of the reasons for Agricultural Property Relief (APR) which can provide up to a 100% relief against the agricultural value.
What is agricultural value?
It is important to note that in some cases the market value of a property and its agricultural value may differ. This is most obvious in the case of a house that is occupied for agricultural purposes but is not subject to an agricultural tie, meaning in theory it could be sold on the open market without restrictions to occupation.
Historically the difference in market and agricultural value has been regarded as a 30% reduction, however our market analysis suggests a lighter reduction which we have been successful in supporting.
For a dwelling to be eligible for APR it needs to be occupied for the purposes of agriculture. This includes any cottages occupied by farm workers and managers, but not cottages let otherwise.
Where property is included within a Farm Business Tenancy it will almost certainly be regarded as agricultural and 100% relief will apply. Older Agricultural Holdings Act tenancies claim just 50% relief.
The water becomes a little muddied where land is let out on grazing licenses as the landowner (or their executors) will need to be able to demonstrate they were actively managing the land and not just receiving the income. Where graziers do carry out management work, they should provide an invoice and be paid for their work in order to maintain a suitable trail.
Tax Planning and Valuation are just two of the many services our Rural Agents can offer to farmers and land-owners. Contact Robyn on 01258 472244 or the rural agents in your nearest office to find out more.