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 |
To qualify for APR, the land must have been
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
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
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 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.
For the farmhouse to qualify it must be occupied for the purposes of agriculture. If the owner actively farms the land and lives in the farmhouse himself then the farmhouse should qualify subject to the character appropriate rest. If the owner does not actively farm but lets the farmland to active farmers but retains the farmhouse for his private accommodation, the farmhouse will then not qualify for APR on the grounds that it is not occupied for the purposes of agriculture. If the farmhouse was also let to the active farmers who farmed the land surrounding the house then the house will qualify, again subject to the character appropriate test.
The character appropriate test has no formal requirements. A large amount of case law has built up suggesting the below are some of the factors which should be considered, this list is not exhaustive and each case will require different considerations.
Should qualify if they are being used for an agricultural purpose, are of the character appropriate to the farm as a whole and are not left empty. For example a garage which stores plant and machinery used on the farm would qualify as would farm cottages occupied by farm workers.
The agricultural value of the property may be lower than the market value of the property as it excludes any value attributable to its potential for an alternative use i.e. property development. For actively farmed property it is likely that Business Property Relief (BPR) would be available to relieve the excess value – (see BPR quick guide)
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