Contact: accstobalance@gmail.com
https://accountstobalance.co.uk
Agricultural Property Relief (APR)– Overview
This is the third series of the inheritance tax segment. The focus is on APR, agricultural property relief.
Agricultural property concerns either agricultural land or buildings, used for the purposes of agriculture and situated either in the UK, the Channel Islands, the Isle of Man or an EEA State.
This extension will cease with effect from 6 April 2024, and the government will introduce legislation to restrict the scope of APR and woodlands relief to property in the UK. Property located in the EEA, the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK.
APR is a valuable inheritance tax (IHT) relief as it can reduce the IHT payable on gifts of agricultural property that aren't potentially exempt transfers; as well as the agricultural property in the deceased's estate.
But what do we mean by agriculture?
Agriculture has not been meticulously defined but it includes horticulture such as growing fruit, vegetables and crops as well as the intensive rearing of livestock and fish for human consumption and other products, such as wool.
Notable activities specifically excluded from qualifying for APR may include grazing horses (except in connection with a stud farm), keeping birds such as pheasants for sport.
While not in scope for APR, these may qualify for BPR (Business Property Relief –see the March edition of the IHT series).
To summarise agricultural property relief is primarily available in two scenarios:
1. a farmer who owns land and buildings and uses these assets in their own business.
Contact: accstobalance@gmail.com
https://accountstobalance.co.uk
Rates of Agricultural Relief
APR is given as a percentage of either 50% or 100% of the ‘agricultural value’ of the land. The agricultural value of the land will differ from the market value or development value. For the 50% rate of APR to be applicable, the agricultural land must be ‘tenanted’.
Period of ownership
The property must have been owned and occupied for agricultural purposes immediately before its transfer, for either 7 years prior to death if the property is rented out, or if owned and lived in by the donor, then ownership period has to be held for at least 2 years before death.
Example
Mick owns 22 acres of land in Bedford which he bought in September 2010. In 2012, he has a horse-riding accident and damages his back so he rents out the land to local farmer Padraig under a farm business tenancy. In March 2023, Mick gives 12 acres of the land to a discretionary trust. The land had a market value of £4,000 per acre and an agricultural value of £2,000 per acre.
Ignoring annual exemptions and purely focusing on APR, Mick’s transfer value is £12000.
Value transferred = 12 acres @ £4,000 = £48,000
Less: APR on agricultural value (100% × 12 acres × £3,000) (£36,000)
Transfer of value £12,000
If you require any assistance, please feel free to contact us on the email address: accstobalance@gmail.com
Legal disclaimer
Contact: accstobalance@gmail.com https://accountstobalance.co.uk
This summary is for information purposes only. It provides only an overview and no action should be taken without seeking professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the author or the firm.
© Accounts to Balance Ltd
You must not copy, make available, reproduce, sell, distribute, publish or otherwise circulate publicly or commercially any part of this material in any format whatsoever unless you have obtained the prior written consent of Accounts to Balance Ltd.
Anthony