What is agricultural property relief?

If you’re involved in farming, you may be aware that you can take advantage of tax relief to avoid some inheritance tax. This is known as Agricultural Property Relief (APR). We take a look at how the system works.

APR

The government’s guidance on APR is that up to 100% tax relief may be applied for on certain agricultural property, either before or after death. Certain caveats apply, of course, such as who is deemed the owner of the land and how long they have owned it, but APR can be a valuable tool in mitigating the expenses of inheriting agricultural property.

What is classed as agricultural property?

According to the government, the following qualifies as agricultural property for the purposes of APR:

• Land or pasture which is used to grow crops or rear animals in the UK, the Channel Islands, the Isle of Man or in the European Economic Area
• Equine stud farms
• Short coppice rotation
• Land which is not, at present, farmed under a Habitat Scheme (land which is managed to preserve the habitat of wild animals and birds)
• Land which is not, at present involved in crop rotation
• The land’s associated milk quota value
• Certain agricultural shares and securities
• Farm buildings, cottages and farmhouses

Farm machinery and equipment, buildings which are derelict, crops which have been harvested, livestock and property which is subject to a binding sale contract do NOT qualify for APR.

Timescales

There are also certain timescales associated with APR which must be adhered to in order to qualify. These state that the property must have been owned and used specifically for agricultural purposes for two years by the owner (or their spouse or a company run by them) or seven years if the property was occupied by, for example, a tenant, immediately before its transfer to a beneficiary.

100% or 50%?

The rate at which APR can be claimed varies according to circumstances. Relief of 100% can be claimed if the land owner farmed it themselves; the land was let out on a short-term grazing licence; or if a tenancy was begun on or after 1 September 1995.  All other circumstances will qualify for 50% relief.

If you’re involved in agriculture and would like clarity on any aspect of APR, talk to a member of our team. Our professional advisors can offer advice and information about all aspects of inheritance, not just agricultural property relief, which may benefit you or your descendents.