Taxpayer Victory: Tribunal Grants Inheritance Tax Relief to Livery

Business Property Relief

Business Property Relief (BPR) can exempt assets from Inheritance Tax (IHT) on the basis that they were used in a genuine business, assuming all other qualifying criteria is met. It is not available where the business activity is wholly or predominantly holding investments.

In The Estate of Maureen W Vigne (deceased) v HMRC [2017], HMRC denied the BPR claim entered by the deceased’s representatives on the basis that her livery involved only the letting of land for the use of others, and the extent of the other services offered did not constitute a business.

The first tier tribunal, however, countered that the extra services demonstrated that the business was a genuine livery business and it clearly went beyond simply holding investments. They allowed the BPR claim.

The representatives had also claimed agricultural property relief (APR) on the basis that the asset constituted ‘agricultural property’.  However, the tribunal held HMRC’s view that it did not. Equine activities are not usually characterised as agricultural.

Green & Co undertake inheritance tax reviews which consider an Estate’s exposure to IHT and planning opportunities. If you’d like any further information please contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Your Redundant Farm Building could be Restricting your Inheritance Tax Relief

Your Redundant Farm Building could be Restricting your Inheritance Tax Relief.jpg

Agricultural Property Relief (APR), if obtained, allows an individual to pass on agricultural property, either in their Will or during their lifetime, free of Inheritance Tax (IHT).

Business Property Relief (BPR) reduces the IHT payable on a wider class of qualifying business assets when they are left in a Will or passed on during lifetime.

In order to qualify for APR farm buildings must be occupied for the purposes of agriculture – derelict buildings will not qualify for the relief. Similarly, if the property has not been used wholly or mainly for business purposes in the two years prior to the transfer, BPR will not be secured.

It’s important for all Farmers to consider their exposure to IHT and if farm diversification is currently being pursued, i.e. alternative uses of agricultural land and buildings, then it’s wise to act sooner rather than later.

If you would like further advice on Inheritance Tax 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.

Estate Planning and Farmhouses

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Most land owners are aware of Agricultural Property Relief (APR) and could be forgiven for thinking that this means there is no risk of their Estate paying Inheritance Tax.

Unfortunately there have been cases where the HM Revenue & Customs have successfully challenged claims for APR and the rules are complicated. This is particularly true for Farmhouses.

In order for the farmhouse to qualify for APR it has to be of a character appropriate to the farm. The farm-house must be occupied for the purposes of agriculture and preferably by the farmer of the land. APR on a farm-house may be lost if the farm-house is retained on retirement but the land is let on a Farm Business Tenancy. The farmer must continue to be actively involved in the farming business.

Problems can occur when a farmer owns a large farm with a house and on retirement gives the majority of the land away but retains the “farmhouse” and a small proportion of the land. This can mean that the farm-house is no longer character appropriate to the land retained. HM Revenue & Customs are using these arguments to curb “non-farmers” who buy “lifestyle farms” and contract out farming activities or farms where there is not a full-time farmer residing in the farm house.

It is worth noting that APR is only given on the agricultural value of the house. That is the value assuming the property could only be used for agriculture. This means that often between 15% and 30% of the value will not attract relief. The more integral the farmhouse is with the yard and other farm buildings the lower the discount will be.

For further information contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Will Your Farm Buildings Still Qualify As Agricultural Property?

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As you may be aware, a new amendment to planning laws in England allows farm buildings to be re-developed into dwellings in certain circumstances, without requiring special planning permission. Good news for farmers, you might think, but beware!

The effect is that farming families could be caught for extra Inheritance Tax on outbuildings that they have no intention of developing unless they can arrange to claim Business Property Relief on any element of market value above Agricultural Property Relief.

This is because HMRC could argue that all agricultural buildings now have development value as planning permission is no longer required. Thus Farmers could face a problem if only APR and not BPR is due.

It is essential that Farmers take advice and review their assets and usage now to safeguard these valuable reliefs.

Should you require any assistance in this area please contact Green & Co, the Tax experts for farming businesses.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Renewable Energy: Beware The IHT Implications!

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For landowners looking to secure income through renewable energy development, a key decision is whether to go it alone and install and operate the project themselves, or simply to lease the land to a developer. But the two options have very different tax consequences from the perspective of capital taxes. The major concern for most landowners is inheritance tax.

The two main reliefs are agricultural property relief (APR) and business property relief (BPR) and can be either 50% or 100% relief.

APR only gives relief to the agricultural value of the land and so any value accruing due to the renewable energy project will not qualify.

BPR may be available depending on whether the project is considered by HM Revenue and Customs to be an investment as opposed to a trade. Essentially, an in-hand project is likely to be considered a trade and BPR may well be due once the required minimum two year period has been met.

Let land is, however, in most circumstances regarded as an investment and as such would not automatically qualify for BPR.

Clearly, it is important when deciding to secure an income from renewable energy that the correct structure is put in place in order to obtain either full APR or BPR. Professional advice should be sought before entering into any contract. Green & Co would be happy to help in such circumstances. Contact us on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.