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It is clear to see why such sudden and sharp changes to Agricultural Property Relief and Business Property Relief have angered the UK’s farming communities – many of whom feel that they will be unable to hold onto land that has been in their family for generations.
Where historically Agricultural Property Relief relieved 100% of an individual’s agricultural land from IHT, under new reforms the value of farming assets qualifying for Relief will be aggregated and capped at £1m per farmer. Anything above this cap will be taxed at 20%.
This will likely pose a number of complex issues for farmers to navigate. Should they be unable to pay the IHT, farming families will likely be forced to sell parts of the farm and may therefore have to go into partnership with their children to mitigate tax exposure and keep a hold on their farms – many of which have been passed through the family for generations.
I have had clients starting to book meetings to discuss the changes to agricultural property relief. Whereas, planning was mainly via Wills or lifetime trusts, it is going to very much now be lifetime planning, lifetime gifting and use of family investment companies where the value of the parents shareholding is frozen and future growth is held within the children’s shareholding, thereby mitigating the parents exposure to inheritance tax. Parents can decide how much control to give their children with bespoke shares.
Inevitably, children are going to receive farming assets sooner, during their parents’ lifetime.”
For information on inheritance tax changes, or if you need further tax advice, please contact one of our personal tax law solicitors by email or call on 03333 231 580.