INTRODUCTION
Welcome to the Albert Goodman Farms & Estates Team Rural Intelligence. Farming and estate management isn’t just about working the land — they are complex and very diverse multi-facetted businesses, where good financial planning can make all the difference. That’s where this newsletter comes in.
Each season, we aim to bring you clear, practical updates on tax and accounting matters that affect farms and estates — from changes to agricultural property relief and the trust regime to tips on managing cashflow, succession, and diversification income.
As I write this in the run up to the Autumn Budget, we continue to be very busy supporting our clients on their plans to transition through the proposed new IHT regime. This continues to be a hugely uncertain time, thrown into even more uncertainty in light of the Centax report and indications that this is being considered by Treasury. Whilst this might bring welcome news to many, we must be mindful that this could cause huge uncertainty for others – an increase in the 100% IHT allowance to £5M would be hugely beneficial for some, but the cliff edge for those with larger estates, more than £10M, or with more than 40% non-farm or business income could mean no IHT relief at all. This makes planning in advance even more uncertain. As we approach the budget and, in the days after, we will continue to keep you up to date with any changes.
Our objective in this newsletter is simple: to help you keep on top of the numbers so you can focus on running your business. Whether you’re looking to save tax, plan for the next generation, or make sense of the latest HMRC guidance, we’ll break it down into plain English with examples that make sense on the ground.
In this issue, we look at the latest updates affecting rural businesses and share practical advice you can put to work straight away. This includes the latest news from HMRC on private use and a case involving CGT reliefs on disposal of a business as well as updates regarding the proposed new rules for IHT, VAT on storage and matters to consider regarding the use of machinery in your business.
Lastly, don’t miss our upcoming seminars in partnership with Symonds & Sampson and Lloyds Bank to discuss what to consider post-Budget We are hosting these in three locations and further details about where and when they will be and how to book, are on the final page of the newsletter.
From all of us in the Farms and Estates Team at Albert Goodman, thank you for reading — and as always, if you’d like to talk through how any of these topics affect your farm or estate, please get in touch.
SAM KIRKHAM Partner and Head of Farms & Estates Team
INHERITANCE TAX REFORMS –TAKE ADVICE BEFORE APRIL 2026
From 6 April 2026, the Government is reforming Agricultural Property Relief (APR) and Business Property Relief (BPR). The key change is that 100% relief on combined agricultural & business property will be limited to the first £1 million of qualifying assets. Above that, relief drops to 50%, meaning an effective Inheritance Tax (IHT) rate (on the excess) of up to 20%, rather than the full 40%.
All businesses need to consider how to respond — financially, legally, and in terms of succession planning before the changes come into force.
I have summarised five areas below to focus on before the 6 April 2026:
1. Understanding the impact for your family
If you haven’t already, then the starting point needs to be understanding how the new rules impact your death estate.
To proceed effectively, it’s essential to engage with your professional advisers to obtain accurate valuations of land, buildings, property, and deadstock. This will enable a reliable IHT appraisal that clearly illustrates the impact of transitioning from the current rules to the new regime.
2. Cash flow planning
Once you understand your liability, you can consider ways of mitigating its impact on your family.
Exploring how you could pay this liability, and the impact on the business is extremely important. Many are looking at life insurance to help with the burden or are retaining assets that could be sold in the worst-case scenario, to pay the liability on death.
3. Updating Wills, Partnership and Shareholders agreements, and maximising relief
It is important to review your existing legal documents to ensure that they are future proof.
Not updating Wills to deal with the changes could cost a family the loss of a £1m allowance. This would create additional IHT liability of £200k.
Maximising IHT relief remains a key consideration. It’s therefore essential to ensure that the appropriate assets are held by the right individuals / entities and that partnership and shareholders agreements are kept.
4. Considering lifetime gifts and maximising allowances
Many businesses and families in tandem with the above are considering lifetime gifts to reduce IHT.
Gifts can be either outright, or via a trust. See Abi’s article for a detailed analysis of gifts into trust.
As with any gifts - to ensure they are effective - you must ensure that you do not retain benefit from that asset. You must also be comfortable with the loss of control and loss of income, that often comes with taking this next step.
5. Review business structures
Whilst considering the future, it is also important to ensure the business structure is future proof and assess if any changes will adversely impact your IHT position.
Switching to a limited company structure can offer significant IHT planning advantages, particularly through share discounting. However, it is important to also consider the adverse consequences of turning business capital into a director’s loan, and the potential loss of relief on some assets.
For more information surrounding the use of a limited company structure, please see the article below:
Will the use of Family Investment Companies be more prevalent from April 2026?
Summary
Every business, family, and individual have unique circumstances, so the impact of the rules—and the appropriate next steps—will vary from case to case. The key is to start engaging now, both with your advisors and among yourselves, to begin taking informed steps in the right direction. Also bear in mind there could still be further changes announced in the next budget, so any decision must be the right one for the long term future of the family and the business, independent of tax.
TOM STONE Farms & Estates Team tom.stone@albertgoodman.co.uk
INHERITANCE TAX PLANNING
TOP 10 COMMON PITFALLS
Inheritance Tax (IHT) planning is often approached with good intentions but poor execution. Whether due to outdated advice, poor assumptions, or a lack of joined-up thinking, families can find themselves exposed to unnecessary tax liabilities. Some of the most common—and costly—pitfalls to watch out for are summarised below:
1. FORFEITING THE IHT UPLIFT ON DEATH
One of the most valuable tax benefits of holding assets until death is the Capital Gains Tax (CGT) uplift. When assets pass on death, their CGT base cost is reset to market value, eliminating any latent gain. Gifting assets during lifetime forfeits this uplift, meaning the recipient inherits the donor’s original base cost and may face significant CGT on future disposals. This is particularly relevant for property, shares, and other appreciating assets. Therefore, when considering how any IHT liability would be paid, including where gifts are made but the donor may not survive seven years, if assets are likely to be sold, it may be better to retain those assets if the IHT rate is 20% compared to current CGT rates of 24%.
2. GROB: GIFT WITH RESERVATION OF BENEFIT
Gifting an asset doesn’t always remove it from your estate. Under the GROB rules, if you continue to benefit from the asset—such as living in a gifted property or drawing income from gifted investments—HMRC will treat the asset as still part of your estate for IHT purposes.
What’s more, if a GROB is triggered, the asset is brought back into the estate at its market value at death, not the value at the time of the gift. This can significantly increase the IHT exposure, especially where the asset has appreciated. To avoid this, the donor must genuinely relinquish all benefit or structure the arrangement carefully—such as paying full market rent under a formal lease.
3. ACCIDENTALLY RESETTING THE CLOCK ON RELIEFS
Gifting tenanted agricultural land to a spouse during lifetime may seem tax-efficient (to utilise two £1M allowances), but
it can unintentionally disrupt eligibility for Agricultural Property Relief (APR). While transfers between spouses are exempt from IHT, APR requires the land to be owned for at least seven years if it is let to a tenant. A lifetime gift resets this ownership period, meaning the spouse must meet the full seven-year requirement from the date of transfer to qualify for relief. If the spouse dies before this period is met, APR could be lost—potentially resulting in a significant IHT liability. This highlights the importance of reviewing ownership timelines and seeking advice before making intra-family transfers of agricultural property.
4. HIDDEN TAX CONSEQUENCES OF GIFTING
Make sure you consider all the tax implications, not just IHT. Gifting can trigger other taxes such as:
Capital Gains Tax (CGT): Gifts are treated as chargeable disposals at market value for CGT purposes, so tax may still be payable even where no proceeds are received, particularly where no holdover relief is available such as rental properties.
Stamp Duty Land Tax (SDLT): If the gift involves property with a mortgage, SDLT may apply.
VAT: Transferring a VAT-registered business or property may require careful handling to avoid unexpected charges – this is discussed in Richard Taylor’s article.
5. MISUSING THE £1 MILLION RELIEF: PARTIAL QUALIFICATION CAN UNDERMINE THE PLAN
Many people assume that transferring £1 million worth of land to a spouse or another family member will automatically secure full IHT relief under APR or BPR. But this only works if the land fully qualifies.
If the land only qualifies for partial relief—for example, under an old Agricultural Holdings Act (AHA) tenancy where only 50% APR is available—then the full £1 million value won’t be covered. That means you could end up using your relief inefficiently and still face a significant IHT bill.
To make the most of the £1 million cap, you need to ensure that the entire value of the asset qualifies for 100% relief.
Otherwise, you’re giving away £1 million but only shielding half of it from tax.
6. LIFE DOESN’T FOLLOW THE PLAN
People don’t always die in the “right” order. If assets are expected to pass from one spouse to another before reaching children, but the younger spouse dies first, the plan may unravel. Life insurance can be a useful tool to protect against this risk and ensure liquidity for IHT liabilities.
7. GIFTING DOESN’T MEAN IMMEDIATE IHT RELIEF
Gifts only start to fall outside the estate if the donor survives three years (for taper relief) and seven years for full exemption. Premature death can bring the gift back into the estate, so consideration should be given to how the donee might settle the tax if this happened.
8. ASSUMING APR/BPR WILL APPLY
Don’t assume reliefs will be available. Businesses evolve— what was once a trading enterprise may now be largely investment-based. APR and BPR are only available for qualifying activities, and HMRC scrutinise claims closely. Regular reviews are essential, especially if the business model or ownership structure has changed.
9. FAILING TO REVIEW WILLS
Wills should be reviewed regularly to ensure they align with current legislation and planning goals. For example,
failing to structure bequests to utilise the RNRB or £1M allowance can result in unnecessary tax. A well-drafted Will is a cornerstone of effective IHT planning.
10. MISUNDERSTANDING TRUSTS
Trusts can be powerful tools, but they come with their own tax regime—including 10-year anniversary charges and exit charges. Understanding the long-term implications of trust structures is vital before committing – see Abi Kingsbury’s article for a more detailed review of this area.
FINAL THOUGHTS
IHT planning is not a one-time exercise—it’s a dynamic process that must evolve with family circumstances, legislation, and asset profiles. The cost of getting it wrong can be significant, but with careful planning, regular reviews, and professional advice, families can protect their wealth and pass it on efficiently.
If you’re unsure whether your current arrangements are watertight, now is the time to revisit them—before the next budget or life event forces your hand.
KATE HARDY Farms & Estates Team kate.hardy@albertgoodman.co.uk
TRANSFERS INTO TRUST: CONSIDER POSITION BEFORE APRIL 2026
We are continuing to encourage businesses and agricultural property owners to talk with their professional advisors to review the potential impact of the upcoming changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), set to come in from April 2026. If trusts are in play, implementing a plan before April 2026 may be key.
In my last article I expressed hope the rules may be deferred or relaxed, however, as draft legislation was
published in July 2025, that hope is dwindling. Many clients are looking at all options to safeguard the succession of their businesses and assets without the burden of 20% Inheritance Tax (IHT) on valuable estate assets for deaths post April 2026.
Trusts are routinely considered, particularly for their added asset protection and the ability of the settlor to retain control as trustee, despite being unable to continue to benefit from the settled property.
Importantly, up until 5 April 2026, there is an opportunity to transfer APR/BPR relievable assets/business interests into trust up to an unlimited value receiving full IHT relief on the way into trust.
From 6 April 2026, transfers into trust involving APR/ BPR eligible property will be subject to a £1m cap for 100% relief. Where APR or BPR is claimed, any value settled in excess of this threshold will incur an entry charge at an effective rate of 10%.
For new trusts, this is likely to be a long-term plan as, once assets are transferred in, they are subject to the £1m cap. This means any subsequent capital distributions exiting the trust will generate a tax liability.
Every ten years, there would be an IHT charge for settled assets of up to 3% on relievable assets and up to 6% on chargeable asset values. This has the benefit of providing certainty for planning over time, rather than potential exposure to higher rates of 20% or 40% on death.
IHT related to APR/BPR eligible assets can also be paid over 10 annual instalments, interest free. This should be carefully considered when planning for how future IHT will be financed.
The ability to settle valuable estate assets now, acknowledging that IHT charges will arise periodically every 10 years, may be more affordable than the potential borrowing to cover 20% IHT on death, particularly where APR/BPR applies.
Trusts can be a solution perhaps where individuals do not have appropriate successors during their lifetimes.
Trusts are also beneficial for CGT holdover where an asset, such as a rental property, would not be eligible for CGT holdover if made as an outright gift.
There are of course trade-offs to be made, including:
The trust does not inherit the qualifying holding period of the settlor. Therefore, needing to hold BPR assets for a minimum of 2 years and let APR assets for a minimum of 7 years before qualifying for any relief.
Like gifts to individuals, should the settlor die within 7 years of the trust set up there is potential clawback of the reliefs given at the time the trust was created, with taper relief after 3 years of gifting. Life insurance should be considered to mitigate such risk.
The settlor forfeits the capital gains tax (CGT) taxfree uplift to probate value when they settle a trust, instead most likely claiming CGT holdover relief to defer any gains until sale by the trust.
The trust may need to generate income to pay its
future IHT charges. Trust income is taxed annually at 45%, or 39.35% for dividend income. Income tax planning needs considering.
The settlor and their spouse need to be excluded from benefiting from the trust.
Other taxes need to be considered depending on the assets involved, including Stamp Duty Land Tax (SDLT) and VAT.
If transfers into trust are being considered before April 2026 the window of opportunity to plan and execute is tight. Professional valuation will be required, and specific tax advice should be taken based on individual circumstances as the rules are complicated.
Where the IHT plan includes the involvement of a new trust, implementing plans before April 2026 is strongly advised.
Please get in touch with your usual contact or with me if you would like to discuss further.
RESTRUCTURING OR TRANSFERRING PROPERTY – VAT CONSIDERATIONS
With changes to Inheritance Tax (IHT) coming into effect from April 2026, many farming businesses are reviewing their succession plans. This commonly involves transferring property, often of significant value, making it critical to consider the potential VAT implications early in the process.
Should VAT be charged on a transfer or sale?
Generally, the sale or transfer of the freehold in land or buildings is exempt from VAT, meaning no VAT would be payable. However, there are important exceptions:
Opted land or buildings: where the seller has opted to tax the land or buildings.
New non-residential buildings: A non-residential building is considered ‘new’ if completed within the last three years.
New civil engineering works: These can also be subject to VAT if transferred within the relevant period.
In many cases, it’s possible to mitigate the VAT issues through careful planning. This includes:
Transfer of a Going Concern (TOGC): If after transfer the property continues to be used in a VAT-registered farming business, and other conditions are met, the transfer could be treated as VAT-free.
Charging and reclaiming VAT: If TOGC treatment is not possible and VAT was charged on the transfer, a VATregistered recipient who carries on the taxable farming activity should be able to reclaim any VAT charged, resulting in no net VAT cost.
TOGC treatment may be preferable if SDLT is payable as this is calculated on the VAT inclusive value.
However, if VAT should have been charged but wasn’t, HMRC may impose penalties or charge interest.
HMRC keep a record of opted properties and commonly ask what has happened with them when a VAT registration is cancelled, so at some point in time are likely to identify the disposal of an opted property.
Gifting a property doesn’t remove the VAT risk. If the property is opted or classed as ‘new’, and VAT has been reclaimed on the purchase or construction, VAT may still be payable.
Capital Goods Scheme (CGS) considerations
While not charging VAT at the right time is often an issue that can be largely rectified after the event, the Capital Goods Scheme (CGS) can create a real and permanent VAT cost.
What is the CGS?
Amongst other things, the CGS applies to purchases of land or buildings and the construction or renovation of buildings where the VAT-inclusive cost is £250,000 or more.
In simple terms VAT on a CGS item is initially reclaimed in the normal way, so if a building, say a barn will be used solely for a taxable farming activity VAT is reclaimed in full. Under the CGS if the taxable use of the barn increases or in this case decreases over the CGS adjustment period of up to ten years, the VAT initially reclaimed has to be adjusted.
Using the barn example, if half way through the 10-year CGS intervals its use permanently changes to being wholly for exempt activities (e.g. being rented out), half the VAT initially reclaimed would have to be repaid over time.
CGS risks on property transfers
An exempt sale of a CGS item (e.g. of an empty building, or where TOGC conditions are not met) can trigger a CGS adjustment.
If there is an exempt sale halfway through the 10-year CGS adjustment period, 50% of the VAT reclaimed would have to be repaid. This VAT cannot be recovered from HMRC and the exempt supply cannot be undone.
Avoiding CGS issues:
If the transfer qualifies as a TOGC the buyer inherits the CGS obligations. If they continue to use the property for taxable faming activities until the CGS adjustment period ends no CGS adjustment would be required.
Opting to tax a CGS item could make an otherwise exempt disposal taxable avoiding any CGS adjustment.
Conclusion
VAT implications when transferring, selling, or gifting land and property need to be carefully considered. Understanding the VAT status of the property and taking the correct steps early can prevent costly errors, avoid penalties, and ensure efficient tax planning.
RICHARD TAYLOR
FARMERS PLANNING FOR RETIREMENT: WHY NOW IS THE TIME TO ACT
For many farmers, retirement is not something that’s often spoken about. Farming is more than a job — it’s a lifestyle, a passion, and for many, an identity. Carrying on feels natural. But retirement doesn’t have to mean “putting your feet up” and walking away from everything you’ve built.
Instead, it can mean:
Allowing the next generation to take a more active role.
Supporting the farm where your input is most valuable.
Slowing down to enjoy family, friends, travel, and life outside the farm.
The challenge is making sure the financial side of retirement is properly planned — both for your independence and for the future of the farm.
INHERITANCE TAX (IHT) RULES AND WHAT THEY MEAN FOR YOU
The draft changes to IHT rules should encourage retirement and succession planning. They make it advantageous to transfer qualifying agricultural land, property, and business assets at least seven years before death, helping to reduce the tax burden on the next generation.
Here’s what you need to know:
You can hold £1 million of qualifying land, property, and business capital, on top of the £325,000 nil rate band and potentially the £175,000 residence nil rate band.
Anything above these allowances may be subject to IHT, albeit qualifying assets obtain a 50% discount.
This encourages farmers to gift land and assets down to the next generation — but only if successors are ready to take them on. If not, trust structures may be a solution.
Please note that while prior gifts may fall outside your estate, they are still considered for IHT purposes if you do not survive seven years or if you retain a benefit from the gifted assets. Retaining a benefit can include continuing to receive the same share of partnership profits, or continuing to occupy gifted property without paying full market rent. These scenarios may result in the gift being treated as part of your estate, potentially increasing your IHT liability.
That’s why careful planning — and independent income streams — are essential.
FINANCIAL INDEPENDENCE: YOUR KEY TO STEPPING BACK
One of the biggest barriers to retirement is financial reliance on the farm. To truly step back, you’ll need to ensure you have other income sources such as:
Pensions.
Rental income.
Investments.
Personal capital you’re willing to drawdown.
If planning starts early, building this independence is easier. But even if it feels like you’ve left it late, there are still options. You might:
Use your £1 million allowance more strategically to gain a better income.
Receive an income for the work you undertake
Consider releasing capital through sales (not always popular, but sometimes the right move and all options should be considered).
It is possible to model these options to create a sustainable retirement plan.
COMMUNICATION AND SUCCESSION
Retirement in farming is rarely just a financial decision — it’s a family decision and so:
All children, farming and non-farming, should be considered in succession discussions.
Early, open conversations help reduce conflict later.
Professional advisors, accountants, land agents, and solicitors, can provide an impartial starting point.
We often begin by valuing the estate, assessing the IHT liability, and then considering whether reducing it makes sense — or whether it can be managed through the business or with insurance.
WHY PLANNING MATTERS
Retirement is not just about stepping back — it’s about protecting your family and your legacy whilst allowing a smooth and dignified transition for both you and the next generation.
The earlier you start, the more options you’ll have. But even if you feel behind, there may be steps you can still take.
We help farming families plan for retirement, succession, and inheritance tax. Every farm is unique, and so is every retirement journey.
If you’d like to explore your options and put a plan in place, please get in touch with our team today. A conversation now could save your family significant stress and cost in the future.
KATE BELL Farms & Estates Team
TO BUY OR NOT TO BUY – THAT IS THE QUESTION!
With machinery prices having increased considerably over the past few years coupled with the possibility of being chargeable to inheritance tax post 6 April 2026, what other options are there for attaining the machinery you require to get the work done?
Once you have identified what machinery is essential to your day-to-day workload and what machinery is used sometimes throughout the year compared to what could be done by outside contractors - especially for specialised operations - you can formulate a plan for what is needed.
Purchasing machinery that you always need, such as a feeder wagon on a dairy farm, should then be costed to establish the running costs, including depreciation, so that you know what it is costing you, either annually or by the hour. The old saying of if you ‘don’t measure it you can’t manage it’ comes to mind.
Once you have an idea of the costs you can look at what options are available to you, including outright purchase, hire purchase, finance lease or operating lease - in simple terms an operating lease is a hire agreement where you don’t own the asset and therefore under current reporting requirements, it will not be capitalised as part of the business balance sheet.
There are different tax rules for each option so make sure you understand which will work best for you.
Machinery dealers will offer a variety of options to ensure they get your business now, so don’t be afraid to ask them, to help decide which works best for you.
For machinery that you don’t need throughout the year, you need to decide if you can hire it for the time you need it, jointly own it to reduce the cost to you or can instruct contractors to do the work, at the right time for the right price.
Using contractors instead of doing it yourself can free up working capital and time. The cost of doing the work is known, there are no surprise repair bills and staff are not tied up elsewhere. The contractor may not be available when you need or want them, but with prior planning any delays can be managed as effectively as possible.
Machinery hire allows you to access machinery for a set price, by the hour, day or week. This allows you to have a new machine that will be more efficient on fuel and less likely to breakdown, which means there will be no surprise repair bills, and you do not have capital tied up in the machinery.
Collaboration - in some circumstances you could collaborate with a neighbour or another business to buy machinery jointly. This may be particularly useful for high value items, such as self-propelled forage harvesters or combines. The cost can be split as agreed and the relevant tax allowances claimed.
With delays in being able to acquire machinery for delivery on farm it is never too early to start a plan. To ensure you maximise the tax relief on any purchases you need to make sure you give yourself time to get the deal done.
We would never advise you to buy machinery to save tax but discussing your strategy with us can help ensure you get the right option for you, at the right time and in a tax efficient way.
JAMES BRYANT
Farms & Estates Team
james.bryant@albertgoodman.co.uk
VAT & STORAGE
To boost income and ensure future viability, farming businesses are increasingly diversifying their farming activities. A useful way of generating additional income is renting unused buildings, particularly as older buildings are often unsuitable for modern farming methods.
While the letting of land and property is normally exempt from VAT, the position with buildings used for storage is likely to be different, even without an option to tax.
The provision of storage facilities is normally standard rated for VAT rather than exempt, meaning VAT must be paid on this type of income. Storage facilities include a unit or building, a container or other fully enclosed structure, so would include such things as grain stores.
A key point is that standard-rating can depend on actual use by the tenant. If a tenant is using a building for the storage of goods, it is likely they should be charged VAT. VAT is never straightforward. HMRC say a supply of storage may occur regardless of use if it is implicit in the nature of premises or commercial documentation, such as a lease and the facility is intended for use as storage.
Specifying that a structure can only be used for storage of goods may give some certainty that VAT should be charged but it is vital landlords know how their tenants are using a building. It is well worth ensuring any lease or contract includes a warranty that the tenant will not use the premises for storage or that if they do, they will inform the landlord.
There are certain exceptions including supplies to charities for non-business purposes, storage that is ancillary to a different main use of the building and, of particular relevance to the farming sector, the storage of animals. There is also an exception in very particular circumstances where the landlord and user of the facilities are connected.
Charging VAT on storage may actually be beneficial. In principle VAT cannot be reclaimed on expenses used to generate exempt income. If a building is built or refurbished and the rental income is exempt, VAT on the costs may not be recoverable. If the building is to be used for storage, where the income is taxable, VAT could be reclaimed on costs. Also, if a tenant is able to reclaim any VAT charged there would be no overall cost to them.
It is worth mentioning that providing facilities for parking vehicles, which includes caravans, is also specifically excluded from VAT exemption and is standard-rated.
Businesses that are letting or are considering letting land or buildings need to be aware how the property will be used and carefully consider the VAT treatment.
LEGAL RISK ALERT: STORAGE LETTINGS AND PROCEEDS OF CRIME
RICHARD TAYLOR VAT Senior Manager richard.taylor@albertgoodman.co.uk
Alongside VAT treatment another key consideration when letting storage units, is the potential risks under the Proceeds of Crime Act (POCA) 2002
If a tenant uses a unit for unlawful purposes—such as storing stolen goods or contraband— the rental income received could be classed as criminal property, even if the landowner was unaware. This can lead to serious legal consequences, including investigation or asset seizure.
Those letting out storage space should therefore carry out basic due diligence, maintain clear tenancy agreements, and monitor usage to reduce exposure to POCA-related risks.
KATE HARDY
Farms & Estates Team
kate.hardy@albertgoodman.co.uk
AHA TENANCY SUCCESSION: why early advice on the livelihood test matters
For any potential successor to an Agricultural Holdings Act (AHA) tenancy, understanding the livelihood test is key. The test is complex and commonly misunderstood, frequently resulting in applicants failing on technicalities that could have been avoided. It is important to seek advice early on to ensure that you understand the requirements, retain the required information and secure the best chance of a positive outcome.
To succeed to an AHA tenancy, an applicant must satisfy both the eligibility and suitability tests. The suitability tests are broad and cover everything from the applicant’s character to their financial standing (including a livelihood test), qualifications and training.
The eligibility test is broken into two parts: the close living relative test and the livelihood test. The former requires the applicant to be the outgoing tenant’s spouse, civil partner, child, sibling or person treated as the outgoing tenant’s child.
To satisfy the livelihood test, the applicant must prove that for at least five of the seven years preceding the outgoing tenant’s death, they derived their principal source of income from their agricultural work on the holding, or on an agricultural unit on which the holding forms a part. It is generally accepted that “principal” in this context means more than 50%.
Whilst this sounds reasonably straightforward, there are many pitfalls which result in this being quite a complex calculation.
Firstly, the applicant’s income, in this instance, is defined in terms of their livelihood expenditure, i.e. what they actually spent or consumed for the purpose of living their chosen lifestyle. This includes both monetary amounts and benefits in kind. The test aims to establish how much of their livelihood expenditure was funded by their agricultural work on the holding, or an agricultural unit on which the holding forms a part (qualifying income) and how much was funded by income from elsewhere (non-qualifying income).
To do this, in simple terms, the first step of the livelihood calculation is to determine the total income received and apportion this between qualifying, and non-qualifying sources. This apportionment is then applied to the livelihood expenditure to ascertain how much of the applicant’s livelihood expenditure is funded by agricultural work on the holding or an agricultural unit on which the holding forms a part. Expenditure on items not deemed to be maintenance or sustenance, such as savings and investments, are excluded from the definition of livelihood expenditure. As such an important part of the livelihood calculation is to identify the source of any such expenditure and determine whether it came from qualifying or non-qualifying sources.
It must also be considered that work needs to be agricultural to be qualifying. For example, income generated from rental properties, even if located within the agricultural holding, will be deemed to be non-qualifying as this is not agricultural income. This could also apply to diversified businesses run from the holding, such as campsites, self-storage sites or cafes.
Conversely, agricultural work undertaken at a different location can be deemed to be qualifying if it can be proved that it is on an agricultural unit on which the holding forms a part. If this situation may apply to you then advice should be taken as to how this should be structured, to ensure that you have the best chance of this income being treated as qualifying income in any future livelihood calculation.
The other common misconception with regards to the livelihood calculation, is that it is only the income and expenditure of the applicant that is considered. This is incorrect; it is the income and expenditure of the whole household that is considered within the livelihood calculation. This can have a large impact on the outcome, especially if a member of the household has a substantial income from an external source.
Overall, the complexities of AHA tenancy successions mean that it is advisable to seek advice as early as is practicably possible. The period in question is the seven years preceding the outgoing tenant’s death, therefore thought needs to be given to this well in advance of the tenancy succession taking place. Retaining appropriate records, i.e. bank statements, for this period is also important and will help later with completing the calculation.
If you would like any further information, then please do contact Iain McVicar or Jenny Cotton.
JENNY COTTON Farms & Estates Team jenny.cotton@albertgoodman.co.uk
MOFFAT & ANOR V HMRC: BADR AND THE “SUBSTANTIAL NON-TRADING” TEST
Business Asset Disposal Relief (BADR)
BADR, formally Entrepreneurs’ Relief, allows individuals to pay a reduced rate of Capital Gains Tax (CGT), on a material disposal of trading business assets, up to a £1million lifetime limit.
It is a relief that can support retiring or exiting business owners.
Broadly a material disposal is the disposal of the whole or part of a business that had been owned for 2 years before the date of disposal.
The reduced rate of CGT for BADR is currently 14% and set to increase to 18% from 6 April 2026. This remains favourable compared to CGT of 24% for individuals who already use their basic rate band with their general income.
A recent case, Moffat, is a reminder that BADR depends not only on a material disposal of business assets but also on the balance of trading vs non-trading activity. For rural businesses, where property and trading services often mix, that balance can be critical.
Moffat & Anor v HMRC - the background
Andrew and Charlotte Moffat sold shares in a holding company whose subsidiary managed moorings on the Thames. Alongside the moorings, the company offered repairs and maintenance. They claimed BADR on disposal.
HMRC disagreed, arguing the group was mainly exploiting rights over land. The Tribunal agreed, finding that the nontrading activity was “substantial”, so BADR could not apply.
The First Tier Tribunal looked hard at the accounts and the figures showed:
About 68% of turnover came from mooring and licence fees – property income
Around 80% of assets were tied to the moorings themselves – property income
The trading element, the services, many of which were recharged at cost and not run as profit-making.
The tribunal called the non-trading side “substantial”, which is the key test. If non-trading activities are more than just incidental, the company will not qualify as a trading company for BADR. On that basis, the relief was denied.
What “substantial” means
There is no fixed threshold for “substantial”. HMRC suggest that if non-trading is below about 20% (measured across turnover, profits, capital value of assets and staff time), it is unlikely to be “substantial”.
Note that the term “substantial” is being used here in the context of CGT which is different to the “mainly” trading context in assessing Business Property Relief (BPR) for inheritance tax purposes.
Many rural businesses have diversified. These may fall into the non-trading territory. If services are provided alongside property rental at cost or only because the licence terms demand it, those services may be very unlikely to strengthen the trading argument based upon the Moffats case.
For example:
Campsites and caravan parks, where pitch fees dominate.
Glamping pods or shepherd’s huts, where the main charge is for space.
Storage barns or units, often let out with minimal services.
Festival or event parking, where the income is mostly for land use.
What to consider:
Review how turnover, assets and staff time divide between property-based income and active services.
Price services commercially, not just for recovery.
Consider ring-fencing property-heavy activities in a separate entity or structure.
The key is to plan ahead; if you are looking to dispose of your business interest and BADR is to be utilised, reviewing how your business is operated or structured to utilise such reliefs ahead of this, may be beneficial.
SARAH LEMON Farms & Estates Team sarah.lemon@albertgoodman.co.uk
HMRC FOCUS ON PRIVATE USE ADJUSTMENTS
HMRC has recently announced an increased focus on Private Use (PU) adjustments as part of its small business compliance activity. This follows a trial in 2024, which revealed widespread issues with disallowable private use being incorrectly included in business expense claims.
As a result, HMRC plans to open more enquiries into PU adjustments for business expenses claims made by sole traders, partners and landlords, where personal use of business assets or services has not been correctly apportioned.
WHAT IS A PRIVATE USE ADJUSTMENT?
Private Use (PU) adjustments are required when an expense is incurred for both business and personal purposes. Only the business-use portion of the expense can be claimed as an allowable deduction for tax purposes. Expenses incurred wholly for personal use are not allowable and should be excluded from business accounts entirely.
COMMON EXAMPLES OF EXPENSES REQUIRING PU ADJUSTMENTS INCLUDE:
Motor vehicle expenses
Farmhouse or home office costs
Internet and telephone charges
Sole traders and partners must review such mixed-use expenses annually, especially if personal or business use has changed during the tax year.
WHAT SHOULD YOU DO?
With HMRC’s focus in mind, it is essential to:
Review all mixed-use expenses for the current and previous tax years.
Ensure that business-use proportions are realistic, justifiable, and backed by appropriate records (e.g. mileage logs, usage diaries).
Update any outdated or estimated claims to reflect actual use as closely as possible – if we already prepare your accounts, we’ll discuss the apportionments with you as part of the initial accounts preparation.
While this review will not prevent HMRC enquiries, it will help ensure that robust supporting evidence is available to defend the position and swiftly rebut any challenge.
If you would like any advice on private use adjustments, please get in touch with one of the team.
GRACE POPHAM
Farms & Estates Team
grace.popham@albertgoodman.co.uk
COMPANIES HOUSE IDENTITY VERIFICATION: ACTION REQUIRED TO AVOID FILING DELAYS
From 18 November 2025, Companies House will begin enforcing new identity verification rules for directors, People with Significant Control (PSCs), and those filing on behalf of companies. These changes, introduced under the Economic Crime and Corporate Transparency Act 2023, are designed to improve the accuracy of the company register and reduce the risk of fraud.
Who Needs to Act?
The new rules apply to:
All directors and PSCs, both new and existing
Anyone filing documents with Companies House, including agents and corporate service providers
To continue filing on your behalf, we now require each relevant individual to complete identity verification and provide us with their unique verification code.
What You Need to Do
1. Complete identity verification via the new Companies House system using your GOV.UK One Login - Verify your identity for Companies House - GOV.UK
2.Onceverified,youwillreceivea11-character alphanumeric code
3. Send this code to us as soon as possible so we can link your verified status to our records and continue submitting filings on your behalf
This process is quick and secure, and most verifications can be completed online in just a few minutes.
Why It Matters
Without this code, we will not be able to file documents for you once the new rules come into force. The identity verification requirement is mandatory, and failure to comply may result in rejected filings or delays in meeting statutory deadlines.
Plan Ahead
We strongly encourage you to complete this step now, well ahead of your next confirmation statement or filing deadline. Early action will help avoid last-minute issues and ensure a smooth transition when the new regime begins.
If you’ve already received a request from us, please prioritise it. If you’re unsure whether you need to verify or how to begin, don’t hesitate to get in touch — we’re here to support you through the process.
KATE HARDY Farms & Estates Team kate.hardy@albertgoodman.co.uk
EVENTS
What Farmers Must Consider Post Budget
Cullompton
2 December
Padbrook Park Hotel, Cullompton, EX15 1RU
Blandford Forum 8 December Crown Hotel, Blandford Forum, DT11 7AJ
Wincanton 9 December Wincanton Racecourse, BA9 8BJ
ALL FROM 6.30PM. BOOKING REQUIRED — PLEASE RESERVE YOUR PLACE VIA THE QR CODE OR THE CONTACT DETAILS PROVIDED BELOW. amy.wilshaw@albertgoodman.co.uk or call 01823 286096
SAM KIRKHAM
sam.kirkham@albertgoodman.co.uk 01823 250350
IAIN MCVICAR
iain.mcvicar@albertgoodman.co.uk 01823 250283
KATE HARDY
kate.hardy@albertgoodman.co.uk 01305 752064
KATE BELL
kate.bell@albertgoodman.co.uk 01823 250286
KEEPING IN TOUCH
If you would like this
APPROXIMATE TIMINGS ARE: 18.30 - 19.00
Arrival with tea and coffee 19.00 - 20.00
Presentations from Symonds & Sampson, Lloyds Bank and Albert Goodman. 20.00 - 20.20 Q & A 20.20 - 21.20 Hot Supper 21.30
Event Close
TOM STONE
tom.stone@albertgoodman.co.uk 01823 250397
JAMES BRYANT james.bryant@albertgoodman.co.uk 01823 250372
LIZ JONES liz.jones@albertgoodman.co.uk 01823 286096
ABI KINGSBURY
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