Inheritance Tax & the Agricultural Property Relief Two Year Rule
You should be aware that the scenarios described in this article do not cover all possible inheritance tax planning issues and you should seek our specific advice in relation to your particular circumstances.
Farming businesses are often the making of generations of a family, with the hope that many more generations will continue the business for years to come. Therefore protecting your farming business is essential and you should consider Inheritance Tax and Capital Gains Tax when deciding to gift agricultural property either via your Will or in your lifetime.
Agricultural Property gifted via your Will or during your lifetime may qualify for Agricultural Property Relief. Agricultural Property Relief is designed to remove or reduce the Inheritance Tax due on agricultural property.
Agricultural Property Relief will apply to:
- Growing crops
- Stud farms for breeding and rearing horses and grazing
- Trees that are planted and harvested at least every 10 years
- The value of milk quota associated with land
- Some agricultural shares and securities
- Farm buildings, farm cottages and farmhouses
Agricultural Property Relief will not apply to:
- Farm equipment and machinery
- Derelict buildings
- Harvested crops
- A property subject to a binding contract for sale
Business Property Relief may however apply to some of the above.
For qualifying property Agricultural Property Relief can be applied at either 100% or 50%.
100% Relief will be applied if:
- The person who owned the land farmed it themselves
- The land was used by someone else on a short-term grazing or cropping licence
- It was let on a tenancy that began on or after 1st September 1995
If the above conditions are not met but Agricultural Property Relief can still be applied it will be applied at a rate 50%.
You must also have owned and occupied the property for at least two years prior to your death for it to qualify for Agricultural Property Relief. If you own the land before your death but the land is occupied and used by a third party for agricultural purposes then you must have owned the land for at least seven years prior to your death for it to qualify for Agricultural Property Relief.
Agricultural Property Relief will also apply to any qualifying agricultural property that you gift during your lifetime. This will be applicable if you gift agricultural during your lifetime and do not outlive that gift by seven years. If you do not outlive the gift by seven years the property will fall within your estate and be subject to inheritance tax. Any agricultural property that qualified for relief at the time it was gifted will still qualify provided that it is still held by the person you it gifted to at the date of your death and that it has continued to be used for agricultural purposes since the gift was made.
If you believe your property may be eligible for Agricultural Property Relief it is important to seek advice and you should contact us to discuss your estate before you proceed to make a Will or gift.
The information contained in this article is relevant to the date upon which it is distributed; advice given verbally by Wilson Nesbitt is also only relevant to the day upon which it is given. Tax laws change every year and it is the individual responsibility of each Wilson Nesbitt client to ensure that their Will reflects the current legal and tax position. Wilson Nesbitt cannot and do not give any assurance whatsoever that the legal and tax position at the date of death of a client will be the same as at the date advices are given or Wills are executed.
Gilbert Nesbitt & Lenore Rice
Gilbert and Lenore are senior partners of Wilson Nesbitt, solicitors. Gilbert has been a solicitor since 1978 and a partner in the firm since 1982. Gilbert has been a member of the Society of Trusts and Estate Practitioners since shortly after it’s foundation in the 1990s. Lenore has been a solicitor since 2009, a partner in Wilson Nesbitt since 2012 and a member of the Society of Trusts and Estate Practitioners for the last ten years. They share responsibility for the tax, trust, wills and estate administration department of Wilson Nesbitt assisted by six specialists. Either Gilbert or Lenore are happy to have a phone or video call or meet clients face to face (behind Perspex screens) to discuss Inheritance Tax, complex Will planning or other matters in either our Belfast or Bangor offices.
Take the next step and call us on freephone number 0800 840 9293 or email Wills@Wilson-nesbitt.co.uk to request a free postal Wills & Enduring Powers of Attorney information pack on how you can use our postal service at little cost to make your Wills, make your Enduring Power of Attorney, gift transfer your property or arrange a phone or video call or face to face (behind Perspex screens) consultation with one of our solicitors on making your Will, Inheritance Tax planning, gifting or other tax planning matters.