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When Is A Field Not Agricultural?

View profile for Helen Dexter
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Agricultural Property Relief (APR) is a valuable relief from inheritance tax (IHT) and can significantly reduce or even eliminate the payment of IHT in the estates of farmers and landowners when they die.

Not all land is however eligible for APR. Just because it is a field in the countryside does not mean it will automatically be eligible for relief from IHT.

There are two rates for APR, 100% or 50%.  The rules to qualify are complex and a detailed analysis of the occupation and ownership of land is required in order to consider whether APR is available at either of the rates.  The two different rates of relief have strict ownership and occupation rules which must be complied with. However something that must always be borne in mind is that the land must be used for the purposes of agriculture to qualify for APR at either rate.

Agricultural property is defined as:

  1. Agricultural land or pasture;
  2. Woodland & buildings used for intensive rearing of livestock or fish, if the occupation of the woodland or building is ancillary to agricultural land or pasture; and
  3. Cottages, farm buildings and farm houses together with their land as are “of a character appropriate” to the property.

 

Farmhouses and what is a farmhouse is a completely separate discussion topic, and the discussion can cause great consternation. 

Therefore, if land is owned to qualify for APR it must have been used for agricultural purposes immediately prior to death.  Land used for the grazing of a horse is not agricultural. The land has to be used for the cultivation of food for human consumption (which can of course include land set aside under crop rotation systems). A market garden or allotment is however not sufficient.

Finally the relief given is against the agricultural value of the land. This is not necessarily the same as the open market of the land, particularly when the market value is enhanced due to potential development.  This can, in some cases, mean that even when the land in question is clearly used for agricultural purposes and the relevant ownership rules are met IHT is still paid due to the fact that the agricultural value of the land is only a proportion of the actual (open market) value and IHT is calculated with reference to the open market value.

Sounds complicated? Something you might need advice on? We act for farmers, land owners and investors.  Speak to me or one of the team members who specialise in Agricultural Law.

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