Agricultural Property Relief (APR) is a relief from Inheritance Tax (IHT) on the transfer of ‘agricultural property’. The relief is available at either 100% or 50% against the agricultural value of the property, depending on the type of property being transferred.
| Rate of relief | Types of Agricultural Property |
|---|---|
| 100% | Property where the owner has the right to vacant possession or can obtain vacant possession within 24 months, for example land actively farmed by the owner or land farmed subject to a grazing licence |
| Property let on a tenancy that began on or after 1 September 1995 | |
| Land that is let on a tenancy that commenced prior to 1 September 1995 where the owner became beneficially entitled to the land before 10 March 1981. | |
|
50% |
Land that is let on a tenancy that commenced prior to 1 September 1995 where the owner became beneficially entitled to the land after 10 March 1981. |
| Land let under an agreement which does not allow the owner vacant possession within 24 months |
Holding period
To qualify for APR, the land must have been
- owned and actively farmed for 2 years prior to the transfer or date of death, or
- if the land is let to someone else to farm, then it must be held for 7 years prior to the transfer or date of death.
Definition of agricultural property
The IHT legislation defines agricultural property as follows:
Agricultural property that qualifies for APR is land or pasture that is used to grow crops or to rear animals intensively. This would include
- The growing of crops
- Stud farms for breeding and rearing horses and grazing
- Trees that are plants and harvested at least every ten years
- Land not currently being farmed under the Habitat Scheme (former set-aside land)
- Land not currently being farmed under the crop rotation scheme
- The value of milk quota associated with the land
- Some agricultural shares and securities
- Farm buildings, farm cottages and farmhouses (see below)
As farmers have diversified their business the definition of agricultural property is being tested more than ever. Examples of activities which
do not fall within the definition of agricultural property would be
- wind farms
- commercial woodland
- commercial letting of cottages and barns (to non-farm employees)
- entertainment events
- the provision of farm contracting services
It should be pointed out that some of these may qualify for BPR rather than APR if structured in the right way. See BPR Quickguide.
Agricultural land owned by companies
Agricultural land held in a limited company can still qualify for APR provided that the individual has control over the company and that part of the value of the shares can be attributed to the agricultural value of the agricultural property held by the company.
