Inheritance Tax planning for farmers
Under current Inheritance Tax rules for farmers, up to £325,000 per person or £650,000 per couple can be inherited by their next of kin, tax-free. In addition, any assets left to a spouse or charity or also exempt from any Inheritance Tax.
If a child or next of kin inherits assets above this nil rate band however, they will normally be forced to pay tax at 40% of the remaining value, in accordance with general Inheritance Tax rules.
Although HMRC is reluctant to apply Agricultural Property Relief to estates, carefully and professionally prepared cases can see farm land and property benefit from up to 100% of this APR.
The case should claim that either that the land or property must have been at least owned by the deceased farmer for at least seven years before the date of their death, or that they owned and lived in it for at least two years before their death.
Certain types of leased land may also qualify for APR including woodland, farm buildings and studs, if the lease can be terminated within 12 months.
The criteria for claiming Agricultural Property Relief is notoriously strict and relies principally on occupation and retaining farming character and functionality.