Can I claim Agricultural Relief to reduce my Inheritance Tax liability?
A couple of weeks ago we looked at Business Relief and how this can be used to reduce an Inheritance Tax liability – you can check out the article here.
So, let’s take a look at Agricultural Relief and whether this is something you should consider when Estate planning or something you should be considering as an Executor or Beneficiary of an Estate.
First things first…
What is Agricultural Relief?
Agricultural Relief can be used on land or pasture that is used to grow crops or to rear animals intensively, examples of this include:
- Land used to grow crops;
- Stud farms for breeding and rearing horses;
- Land used to plant trees (that are harvested at least every 10 years)
- Land that is not being farmed under a crop rotation scheme
- The value of milk quota that is associated with an area of land;
- Farm buildings;
- Farm cottages;
- Farmhouses.
How much Agricultural Relief can be claimed?
Agricultural Relief can be claimed at 100% of the value if certain conditions are met.
In order to claim Agricultural Relief at 100% the person that owned the land must have farmed it themselves and so it is important to consider whether they were still working the land at the time of their death. However, the Relief is still available, at 100%, if the land was used by someone else on a short-term grazing licence.
Agricultural Relief can also be claimed at 100% if the land was let on a tenancy that commenced on or after 1 September 1995 and in some circumstances it is available for property owned before 10 March 1981 if other criteria are also met.
Where Agricultural relief is not available at 100% because the criteria and conditions are not met, the Relief may still be available at a reduced rate of 50%.
When considering claiming Agricultural Relief it is important to note that the buildings must be of a size and nature that is appropriate to the farming activity that is taking place; the properties will be valued as if they can only be used for agricultural purposes (which may well be lower than a usual residential property valuation) and if there is any value above this then this would not qualify for Agricultural Relief.
What Agricultural relief CANNOT be claimed for
The following assets will NOT qualify for Agricultural Relief (but may qualify for Business Relief):
- Equipment and Machinery used for farming;
- Derelict Buildings;
- Harvested Crops;
- Livestocks;
- Property that is already subject to a binding Contract for Sale.
It is important to note that when calculating the Agricultural Relief, any mortgages or secured debts against the property or land will need to be deducted first and then the Relief can be calculated.
If you have claimed Agricultural Relief then you cannot also claim for Business Relief for the same asset or assets. However, if Agricultural Relief is not available at the full 100% then you may be able to claim Business Relief on the remainder and this should be considered very carefully.
If you think that your Estate may qualify for Agricultural or Business Relief, or want to find out, it is important to seek specialist advice as this can make a huge difference when sorting out Inheritance Tax and the relevant forms that are required.
Alternatively, if you are an Executor (or Administrator) then you will know that you are under an obligation to maximise the Estate for the beneficiaries and therefore take advantage of all reliefs that are available to you. If you are unsure whether Agricultural or Business Relief applies (or indeed any other Reliefs) please seek the help of a specialist as this could be extremely beneficial to the beneficiaries and reduce the Inheritance Tax liability of an Estate enormously.
If you would like to have a free chat about your options, the Reliefs available, on your existing Will or in relation to making a new Will, please contact us on info@TotalLegacyCare.co.uk or 01727 865 121
Leah Waller
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