In very broad terms Inheritance Tax (IHT) is charged on your estate at a rate of 40% over and above the nil rate threshold (currently £325,000). There may be an opportunity to claim some or all of your spouse’s nil rate allowance and there are also certain reliefs and exemptions from IHT available, including Agricultural Property Relief (APR).
Assets qualifying for APR can receive up to 100% IHT relief under current legislation – which can be extremely valuable to your Estate.
To qualify for APR an asset must be agricultural property, owned for a specified period and used for agricultural purposes at the date of death.
Consequently, for the farmhouse to qualify for APR, it must be used for agricultural purposes and therefore the occupiers should be actively farming the land. The farmhouse also needs to be ‘character appropriate’ to the farm as a whole.
It is also worth noting that APR is restricted to the agricultural value of the property – which may be lower than the actual market value.
Careful consideration is therefore required, especially when starting to look at ways to retain the farm but reduce your involvement in the day to day farming operations.
Renting the land on a Farm Business Tenancy or retiring from a family partnership could put IHT relief on the farmhouse and other assets at risk and it may be worthwhile considering your options which may help preserve the valuable relief.
If you are in any doubt whether your farm assets would currently qualify for IHT relief in the event of your death – act now. We would be happy to talk to you to establish the facts and review your options.
