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Agricultural property relief

What is agricultural property relief (APR)?

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Published 4 January 2022

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The purpose of APR is to exempt agricultural property from the Inheritance Tax which would otherwise have been payable when the property is transferred from one owner to another, either as a lifetime gift or, more likely, on death.

If a claim for APR is being considered then the first point to establish is whether the land (with very few exceptions)  in question qualifies as ‘agricultural property’.

Land, and related farmhouses, will usually qualify for APR if the land is being put to such uses as:

  • growing crops
  • grazing
  • breeding and rearing horses
  • growing tees for regular harvesting.

Farm buildings used as part of the agricultural enterprise qualify, however, land or buildings not directly used for such activities, such as barns converted for holiday letting and caravan parks would not (although, Business Relief might apply.) Farmers claiming APR effectively need to have “mud on their boots”.

Typically APR applies at 100%, though some factors (such as duration of ownership) might reduce this to 50%. For farmhouses, the accepted rate of APR is usually in the region of 70%.

However – there are significant limitations to the scope of APR. For example:

  • The relief applies to the agricultural value of the land. So if, for example, the value of the land is enhanced by development potential, APR will not apply to that enhancement
  • Farmhouses need to be ‘proportionate’ to the extent of the related land. If most of a farm was sold off long ago, leaving a substantial house and half an acre occupied by a few hens and a pig, the house is unlikely to qualify.

Perhaps the main message with APR is that it applies to the agricultural value, as if the land were subject to a perpetual restriction that it could only be used for agricultural purposes (for which, unfortunately, there is no statutory definition.) Any value arising from any other use, or potential use, will probably not qualify.

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Shorter Reads

Agricultural property relief

What is agricultural property relief (APR)?

Published 4 January 2022

Authors

The purpose of APR is to exempt agricultural property from the Inheritance Tax which would otherwise have been payable when the property is transferred from one owner to another, either as a lifetime gift or, more likely, on death.

If a claim for APR is being considered then the first point to establish is whether the land (with very few exceptions)  in question qualifies as ‘agricultural property’.

Land, and related farmhouses, will usually qualify for APR if the land is being put to such uses as:

  • growing crops
  • grazing
  • breeding and rearing horses
  • growing tees for regular harvesting.

Farm buildings used as part of the agricultural enterprise qualify, however, land or buildings not directly used for such activities, such as barns converted for holiday letting and caravan parks would not (although, Business Relief might apply.) Farmers claiming APR effectively need to have “mud on their boots”.

Typically APR applies at 100%, though some factors (such as duration of ownership) might reduce this to 50%. For farmhouses, the accepted rate of APR is usually in the region of 70%.

However – there are significant limitations to the scope of APR. For example:

  • The relief applies to the agricultural value of the land. So if, for example, the value of the land is enhanced by development potential, APR will not apply to that enhancement
  • Farmhouses need to be ‘proportionate’ to the extent of the related land. If most of a farm was sold off long ago, leaving a substantial house and half an acre occupied by a few hens and a pig, the house is unlikely to qualify.

Perhaps the main message with APR is that it applies to the agricultural value, as if the land were subject to a perpetual restriction that it could only be used for agricultural purposes (for which, unfortunately, there is no statutory definition.) Any value arising from any other use, or potential use, will probably not qualify.

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