Inheritance tax can be a significant concern when it comes to passing on agricultural property or land from one generation to the next. However, the UK government offers Agricultural Property Relief (APR) as a means of mitigating the burden of inheritance tax on agricultural assets.
Our Agricultural team explore the concept of Agricultural Property Relief and provide key information to help you understand its implications and requirements.
Understanding Agricultural Property Relief (APR)
Agricultural Property Relief is a tax relief scheme in the UK that aims to support the continuity and preservation of agricultural businesses.
It allows qualifying agricultural property or agricultural land to be passed on to beneficiaries without incurring the full extent of inheritance tax, which can be a huge concern to many when planning any inheritance.
Key Aspects of Agricultural Property Relief
Qualifying Property and Land
To be eligible for Agricultural Property Relief, the property or land must meet certain criteria. This means:
- It should be used for agricultural purposes, such as farming, horticulture, or forestry.
- The land must have been actively farmed for at least two years before the transfer or be eligible for such use.
- Buildings and farmhouses associated with the agricultural land may also qualify.
Ownership and Occupation
The property must have been owned and occupied for agricultural purposes immediately before its transfer for:
- 2 years if occupied by the owner, a company controlled by them, or their spouse or civil partner
- 7 years if occupied by someone else
Agricultural Property Relief can provide relief from inheritance tax at different rates:
Agricultural Relief is due at 100% if:
- the person who owned the land farmed it themselves
- the land was used by someone else on a short-term grazing licence
- it was let on a tenancy that began on or after 1 September 1995
A property that was owned before 10 March 1981 can qualify for 100% relief if:
- it would have qualified under Schedule 8 Finance Act 1975had it been transferred before that date
- the person who owned it had no possible right to vacant possession between that date and the date of the current transfer
Relief is due at a lower rate of 50% in any other case.
Business and Ownership Requirements
To claim Agricultural Property Relief, it is important to demonstrate that the person looking to transfer – or their family – has been actively engaged in the agricultural business associated with the property.
The property should also be considered part of a “qualifying business” for inheritance tax purposes. Meeting these requirements is crucial to ensuring the availability of the relief.
Planning and Professional Advice
Given the complexities surrounding Agricultural Property Relief and inheritance tax, seeking professional advice is highly recommended.
Our experienced agricultural and tax specialist advisors can provide guidance on how to structure your affairs to maximise relief, ensure compliance with relevant legislation, and preserve the value of your agricultural assets.
It’s important to stay informed and consult with qualified professionals to receive up-to-date advice tailored to your specific circumstances. Call our team today on 01900 603623 and see how we can help you secure the future of your agricultural business.