Business Law: Don’t get caught out over reliefs, warns Robert Chalmers

Robert Chalmers of Ashton KCJ

Robert Chalmers of Ashton KCJ - Credit: Archant

The changes in farming practices over the last few decades have encouraged farmers to make better use of their buildings and land, often for non agricultural purposes.

Development and diversification can improve the overall business by providing alternative sources of income and more regular cash flow in an industry which remains uncertain and vulnerable, not only to the weather but also to changing rules and regulations.

There is, however, the danger of meeting immediate benefits whilst ignoring the longer term consequences and in particular those of Inheritance Tax. Yes this is primarily a “death tax” but forward planning remains essential if it is not going to cost the family significant sums in tax which could so easily be avoided.

Whilst farming businesses potentially have the benefit of both Agricultural Property Relief (APR) and/or Business Property Relief (BPR), providing the prospect of 100% relief, these cannot be taken for granted especially with the Revenue looking for every opportunity to raise taxation.

APR is essentially only available on land and buildings used for agricultural purposes. It is also only available on the “agricultural value”. Accordingly cottages used as holiday lets or buildings converted for business use will not have the benefit of APR. Similarly land or buildings which, although used for agriculture, have potential development value over and above the agricultural value will only be protected by APR on the agricultural value. The new “permitted development” rights could also result in land or buildings being assumed to have potential for development even if no permission has been sought. All of this could well result in the values not covered by APR being hit by the full force of 40% Inheritance Tax.


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All is not lost, however, provided that the structures, documentation and record keeping of business activities are all in place. Rescue comes in the form of BPR which in turn offers 100% relief but also depends on its own criteria and requirements being carefully observed.

Farmers are notoriously unwilling to ensure that the basis on which their land and property is owned, occupied and used is properly documented. However, if accounts, deeds and partnership agreements are in place to confirm how the business operates then even assets which may be considered to provide investment rather than trade income could be covered by BPR if not by APR.

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: : Robert Chalmers is a lifetime planning specialist with regional law firm Ashton KCJ.

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