Many farm businesses diversify from traditional farming to other related activities such as livery or hay making for horses. This may be a result of lifestyle changes or perhaps other potential incentives aligned with the Government’s so called Green Brexit.
In such circumstances, they need to be aware of the impact that such a change could have on their entitlement to tax reliefs particularly inheritance tax.
Agricultural Property Relief (APR) can enable a farmer to pass qualifying property, either during their lifetime or as a part of their estate, free of capital gains tax and inheritance tax.
While property that is used to grow crops or to rear animals is quite clearly agricultural property, hay making for horses can mean that the land does not qualify as agricultural. This could prove a target for HMRC looking to deny APR claims. This follows a recent case in which HMRC sought to deny Business Property Relief to a livery business.
It is therefore very important that as part of any diversification plan the tax implications are considered.
If you would like any further information please contact Green & Co on 01633 871122.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.