Trusts and Tax

Take up farming and reduce the IHT Burden

Under the Inland Revenue’s Agricultural Property Relief rules (APR), genuine working farms are usually exempt from IHT. However, if you want to swap your £1m city house for a sizeable farm costing the same, you must choose your farm carefully.

APR will apply to working farmland, but not necessarily to farmhouses. What does this mean?

The first test is that it should be an agricultural property used for agricultural purposes. It must be a viable working farm of at least 50 to 100 acres. Beneath that level, the agricultural activity won’t justify APR on the house. Ensure that you are IACS registered with DEFRA.

The second test is that the house must look like a farmhouse and be appropriately sized for the surrounding farm’s activities. There are no set guidelines on this, such as maximum square footage or number of bedrooms, and each house must be looked at on a case-by-case basis.

It is important to note that the relief is an all-or-nothing relief and heirs cannot argue that part of the house is used for agricultural purposes and thereby get part relief. The more the farmhouse is at the centre of the farm’s operations the better, and it must be used for farming activity on a daily basis.

Trusts & Tax Law
Inheritance Tax - IHT

We are solicitors in London WC2 UK and Gloucestershire

Our lawyers advise on Inheritance Tax (IHT), Wills and farming

Farm operations can (with care) be outsourced to third parties without jeopardising APR - you can live in the farmhouse and recruit a manager or let the land on a tenancy, but the tenancy needs to be less than 12 months or you’ll only get 50% APR. However each case must be looked at carefully to ensure proper relief. The Inland Revenue will see through a sham.

If you are considering this course, beware - APR only applies after ownership of a minimum period of 2 years.

Plan ahead. Felix Appelbe farms in Gloucestershire his own right and has done since 1972. He will be happy to visit and to advise.

To discuss your own situation or to make an appointment, contact Felix Appelbe or Andrew Penfold on 020 7242 7000 or use the Contact Request Form.

Printable version

© Ambrose Appelbe 2004-2008
This web site contains general information only and does not constitute legal advice. You should take suitable advice as to your specific circumstances. Ambrose Appelbe accepts no responsibility and disclaims all liability in relation to such information.