Agricultural property relief

Following on from our last blog on business property relief (BPR), a similar and equally as useful relief for inheritance tax is agricultural property relief.

When calculating tax on an estate:

  1. Agricultural property relief is applied first; and
  2. BPR is applied to any remaining assets if applicable.

Agricultural Property Relief can include:

  1. Agricultural land or pasture;
  2. Woodland and any building used in connection with the intensive rearing of livestock or fish if the woodland or building is occupied with agricultural land or pasture and the occupation is ancillary to that of the agricultural land or pasture;
  3. Cottages, farm buildings and farmhouses, together with the land occupied with them, as are of a character appropriate to the property.

To be applicable, the property must be situated:

  • within the UK; or
  • Channel Islands; or
  • Isle of Man; or
  • within the European Economic area; and
  • it must not be subject to a binding contract for sale.
What’s the value of the relief?

Similar to BPR, there are two different levels for the relief:

  1. 100% where:
    1. The owner has the right to possession immediately or within the next 12 months – i.e. it is not rented out for a long fixed lease;
    2. The property is let on a tenancy which commenced on or after 1 September 1995
  2. 50% in any other case.
So if I buy land to gift to someone, would that qualify for the relief?

Unfortunately not.

To be able to apply for this relief, the owner must have occupied the property for the purposes of agriculture for two years prior to transfer.

Alternatively, if the owner does not occupy it (i.e. because they let it out), the relief can still apply if they have owned it for seven years and it has been occupied for the purposes of agriculture.

Whether or not a farmhouse/cottage will qualify for the relief can depend on various factors and there has been case law on what is a reasonable. Keep tuned for a future article on this.

Clearly this can be a very valuable relief; it is therefore important to keep records of activity on the land, particularly if it is rented out.

Get in touch

If you own agricultural land and wish to discuss agricultural property relief, please give our specialist Wills, Probate & Trusts Wills, Probate & Trusts Solicitors in LeedsWakefieldBradfordManchester and London in 0113 299 4431.