A Brief Guide To Agricultural Property Relief

• Published date: 23 October 2023
• Subject Matter: Tax, Inheritance Tax
• Law Firm: Herrington Carmichael
• Author: Nicole Miller and Keira Moore

Agricultural Property Relief (APR) is a Tax Planning mechanism available to farmers and landowners. It is designed to make the transfer of farming land on death less financially burdensome. It provides total or partial Inheritance Tax relief and is therefore a valuable instrument to reduce the Inheritance Tax liability on an Estate.

Generally, APR applies to land that is used to grow crops or to rear animals. Growing crops, stud farms for breeding and rearing horses, farm buildings, cottages and farmhouses and trees that are planted and harvested at least every 10 years qualify for APR. Livestock, harvested crops, commercial letting of cottages and barns as well as farming equipment and machinery do not qualify for APR. More often than not, where farmers own and farm the land themselves, the land will qualify for 100% relief.

Potential Pitfalls:

OWNERSHIP

You are required to own and occupy the land for agricultural purposes for the two years before death. Where you are married or in a Civil Partnership and you pass the agricultural land to your spouse, this ownership will continue as from the date of purchase.

VALUATION OF LAND

On death, the land is valued, however it is not necessarily valued at market value. It is valued as if it contained a restriction allowing it to be used only for agricultural purposes. It is usually assumed that around a 30% discount on the market value is given. Therefore Agricultural Property Relief may only cover a percentage of the value of the land, leaving part of it liable to Inheritance Tax. There is however, the possibility that the excess value could be relived by relying on Business Property Relief.

FARMHOUSE

A farmhouse on the land may qualify for APR if it is occupied for the purposes of agriculture. When you purchase the land, the farmhouse that you live in, as long as you continue to farm the land, should qualify for APR if it meets the test. If, however you do not actively farm the land but let the...