Agricultural and business clients – How can you utilise IHT reliefs?

The Government has recently carried out research to gain information on how much people with business and agricultural interests know about the Inheritance Tax (IHT) reliefs available to them.

The research found that, for the vast majority, their key focus is to keep these sort of assets within their families. IHT planning is not at the forefront of their minds. That said, there is the possibility that the Government may change the reliefs available, or may scrap them altogether. It therefore makes sense to check the various reliefs available and take action at the earliest opportunity.

The two reliefs in question are Agricultural Property Relief (APR) and Business Property Relief (BPR). For those who are aware of these reliefs, there is a common misconception that if you own agricultural land and/or a business, then the reliefs will be fully available at a rate of 100%. This is not always the case.

For example, not all agricultural assets attract relief at 100%. Some may only attract relief at 50%. Some farmers are also unaware that their farmhouse may not be eligible for relief at 100%. Indeed, HMRC look at a number of factors when determining whether or not a farmhouse is entitled to APR. It’s not enough to simply say that it is a farmhouse and is used as part of the farming business, and should therefore attract APR at 100%.

A further potential issue for farmers is when they let out holiday cottages on their farmland. Many farmers believe these will qualify for APR or BPR, but again this is not always the case.

Lindsay Kirkwood, a Solicitor in our Dundee Office advises, “It would be sensible for agricultural

and business clients to have a review of their assets with their Solicitor and Accountant to ensure that the maximum amount of IHT reliefs are utilised, whilst preserving the assets in the business to pass down to the next generation.”

She continues, “Many of our clients with agricultural or business interests find that the majority of their assets are tied up in property, therefore, if they fail to take advantage of the reliefs available, their estate could be liable to pay a considerable IHT bill, which potentially could have been avoided had they undertaken appropriate planning prior to their death.”

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