Accountants are always advising farmers to manage their affairs carefully so as to be able to take full advantage of the potentially generous reliefs which may be available to them under the Inheritance Tax (IHT) regime.
However, according to Catherine Desmond of accountants Saffery Champness, the National Audit Office (NAO) is launching an investigation in to the misuse of Agricultural Property Relief (APR) and Business Property Relief (BPR), both of which are very important reliefs available to farmers which can reduce or potentially illuminate the need to pay IHT on death. But with an impending investigation by the NAO it seems inevitable that claims for such reliefs will be brought under ever increasing scrutiny.
Accordingly farmers are advised to review their farming business regularly to ensure any changes in farming structure, ownership or occupation do not impact on their potential tax liability.
For example recent changes in planning regulations may encourage some farmers to argue buildings are no longer in agricultural use but the flip side of that coin will be that the Revenue may look to claim such buildings have a value on which reliefs may not be available.
Similarly we will all have seen Solar Parks and other renewable energy projects popping up all over the place and it may be that these developments will change the IHT status of the land and possibly the wider farming business depending upon the scale of the project. Further, another popular device used by landowners, who want to be seen to be farming rather than letting land for IHT purposes, is a contract farming agreement whereby the landowner employs a third party to carry out the farming operations on their behalf. In simple terms arrangement involves the landowner/farmer paying for all inputs over and above the contractor’s charges and then the landowner/farmer benefits from the profits, or losses generated once the crop or other produce has been sold.
This exposes the landowner to the true risk of running a farm but in many cases, although the written agreement may be satisfactory, the reality on the ground may be very different with the contractor effectively “farming” the land while the landowner receives a payment which is more akin to a rent than profit. Such an arrangement may fall foul of scrutiny by the Revenue which could be very costly if this resulted in the value of the land being taxed at 40% rather than receiving 100% relief from tax under either APR or BPR rules.
So the message is that farmers who are growing older should sit down with the family and their trusted professional advisors to ensure they take advantage of any tax reliefs that may be available or are at the very least are appraised of the potential IHT liability if they were to die in a relatively short period of time.
This all seems quite sensible but very often families do not want to discuss the inevitable for one reason or another or professional fees are perceived to be too high and as a result such discussions may not take place until it is too late which in the worst case scenario may jeopardise the future of a family farm.
However, according to Catherine Desmond of accountants Saffery Champness, the National Audit Office (NAO) is launching an investigation in to the misuse of Agricultural Property Relief (APR) and Business Property Relief (BPR), both of which are very important reliefs available to farmers which can reduce or potentially illuminate the need to pay IHT on death. But with an impending investigation by the NAO it seems inevitable that claims for such reliefs will be brought under ever increasing scrutiny.
Accordingly farmers are advised to review their farming business regularly to ensure any changes in farming structure, ownership or occupation do not impact on their potential tax liability.
For example recent changes in planning regulations may encourage some farmers to argue buildings are no longer in agricultural use but the flip side of that coin will be that the Revenue may look to claim such buildings have a value on which reliefs may not be available.
Similarly we will all have seen Solar Parks and other renewable energy projects popping up all over the place and it may be that these developments will change the IHT status of the land and possibly the wider farming business depending upon the scale of the project. Further, another popular device used by landowners, who want to be seen to be farming rather than letting land for IHT purposes, is a contract farming agreement whereby the landowner employs a third party to carry out the farming operations on their behalf. In simple terms arrangement involves the landowner/farmer paying for all inputs over and above the contractor’s charges and then the landowner/farmer benefits from the profits, or losses generated once the crop or other produce has been sold.
This exposes the landowner to the true risk of running a farm but in many cases, although the written agreement may be satisfactory, the reality on the ground may be very different with the contractor effectively “farming” the land while the landowner receives a payment which is more akin to a rent than profit. Such an arrangement may fall foul of scrutiny by the Revenue which could be very costly if this resulted in the value of the land being taxed at 40% rather than receiving 100% relief from tax under either APR or BPR rules.
So the message is that farmers who are growing older should sit down with the family and their trusted professional advisors to ensure they take advantage of any tax reliefs that may be available or are at the very least are appraised of the potential IHT liability if they were to die in a relatively short period of time.
This all seems quite sensible but very often families do not want to discuss the inevitable for one reason or another or professional fees are perceived to be too high and as a result such discussions may not take place until it is too late which in the worst case scenario may jeopardise the future of a family farm.
James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk
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