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Author Topic: Agricultural relief on land for inheritance tax pourposes  (Read 554 times)

juliem

  • Joined Aug 2014
Agricultural relief on land for inheritance tax pourposes
« on: January 11, 2017, 10:05:28 pm »
I am about to embark on sorting out probate on my deceased fathers estate.He gave  me some land 5 years ago valued at 25.000 as a gift.There is a tapering effect...at 5 years 16% of 25.000 needs to be paid.Should I take the hit or go for agricultural relief.I have filled the forms in and the land seems to qualify (farmhouses are difficult)..but I have been told the revenue takes months to make a decision and this could delay probate.Would the revenue start pestering me for tax returns in the future...as at the moment I only rent it out for sheep and never make any money out of it after all bills have been paid
Has anyone any recent experience.?

cas

  • Joined Jul 2013
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #1 on: January 15, 2017, 10:39:19 pm »
If agricultural property relief APR (or as an alternative, business property relief BPR) may apply to the gift, you should claim it when you send in the inheritance tax forms prior to the probate application.  It will not hold up probate, so go ahead.

HMRC may raise queries about the APR/BPR claim in due course, so you can't distribute the estate until any queries have been addressed and IHT clearance has been issued.  However, in the meantime you will have been able to obtain probate and deal with estate assets and liabilities of the estate.

IF APR or BPR applies to the gift at 100%, you will not have to pay any IHT and the gift will not be taken into account in calculating the IHT (if any) payable on your father's estate.

If HMRC does not allow the claim for APR (or BPR) you (as recipient of the gift) would only be liable for tax if the gift took your father's total gifts to more than £325,000 in the last 7 years before his death.  The rate of tax on the first £325,000 of gifts is 0%, so if the gift of land to you was the only significant gift he made in the last 7 years of his life, the rate of tax on that gift would be 0% and you will not be liable for any tax.  However, the gift will have used up a small amount of his nil rate band and so will slightly increase the amount of tax payable on his estate.

Taper relief is only relevant if the gift to you is taxable at 40% (ie not at 0%) as this relief operates to reduce the rate of tax, not the value of the gift.




bazzais

  • Joined Jan 2010
    • Allt Y Coed Farm and Campsite
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #2 on: January 17, 2017, 11:00:26 am »
As far as I thought 'one off gifts' are tax free?

juliem

  • Joined Aug 2014
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #3 on: January 18, 2017, 10:29:02 pm »
Thanks for that..I have posted off the innheritance tax forms today...lots of them so will wait and see..Rang the Inland Revenue helpline several times but they take ages to answer It is only 6 acres of land that I am applying for and not my fathers house which was originally a smallholding.As I live across the field it adjoins my cotttage.
I enclosed a cheque for the probate fee...£215, -When my mother died 5 years ago the solicitors charged £8000 so was determined to do probate myself this time.
Regarding one off gifts "bazzias' are you thinking of one off gifts under £200 a year ?

juliem

  • Joined Aug 2014
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #4 on: February 09, 2017, 03:48:26 pm »
Well 4 weeks later have just been granted probate and the 6 acres of land was given agricultural relief which means it was not included in my fathers estate for inheritance tax pourposes even though he only gave it to me 5 yrs ago (as a deed of gift)
Had to submit maps etc and say what I was doing with it.....(grazing sheep). I think the TAX office are mainly concerned with whether it had any developmental potential .Farmhouses are another kettle of fish however..and you would probably need a solicitor.
Anyway saved £8.000 in solicitors fees by doing the probate myself.....and only took 7 wks.
So even small holdings should consider agricultural relief...if you want to try and pass the land on tax free to your children.

Ecoman

  • Joined Feb 2017
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #5 on: February 10, 2017, 07:25:21 pm »
Apologies if this has been covered before.  We live on a smallholding and keep a variety of animals and grow hay, keep poulty etc on a 'hobby' basis.  However, as we approach 'early' retirement we have the opportunity to develop the smallholding aspects further (and with the help of grown up children still living at home) over the next 10 years or more.   I'm wondering if there is any chance that by doing so we might be able to reduce Inheritance tax by claiming agricultural relief.  The property is a (former) farmhouse and has 9 acres of land including an acre of woodland we planted 20 years ago.  The market value is in excess of £1M so it woud help our children considerably if we could qualify, at least partially, for AGR.

I'm trying to work out if there is any chance of getting relief and if so how we might develop the smallholding aspect to help qualify for this.

doganjo

  • Joined Aug 2012
  • Clackmannanshire
  • Qui? Moi?
    • ABERDON GUNDOGS for work and show
    • Facebook
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #6 on: February 10, 2017, 08:42:42 pm »
Brilliant result, Juliem - well done.  I'm hoping to close sale of a small plot which is owned by myslef and my son and daughter.  Working out the CGT is going to be complicated I think.  The orginal valuation will be the crux as it was part of a larger price of land.
Always have been, always will be, a WYSIWYG - black is black, white is white - no grey in my life! But I'm mellowing in my old age

juliem

  • Joined Aug 2014
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #7 on: February 10, 2017, 11:36:22 pm »
I was half expecting the Inland Revenue to come out and inspect the fields to make sure I was just grazing sheep on them.I know we are dismissed as ""hobby farmers' by farming fraternity with just a few acres...but I still think we should have the same tax advantages as farmers when we try and pass on our acres to our children.Is it not the use of agricultural relief by farmers which has enabled farms to consolidate and get bigger and bigger ...over the last 40 years.
My father was 91 when he gifted me the land.....he'd left it a bit late.But on the tax forms I had to list all the jobs on the land he was doing at 91 and prove that he was actively involved in running the smallholding and they accepted it.

Buttermilk

  • Joined Jul 2014
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #8 on: February 12, 2017, 06:14:48 pm »
No need to come out when satellite pictures know what you have been up to.

juliem

  • Joined Aug 2014
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #9 on: February 12, 2017, 06:59:38 pm »
Well when I look on google earth....my fields show horses (that was a mistake !!!!!) so they are at least 4 years out of date.....they don't even show the Ministry of Defence warehouse which covers 30 acres 150m from my cottage which went up in the last year..There has been so much building of houses/solar farms/chicken farms/ chicken factories/industrial buildings/slurry sites/recycling sites...even a abattoir that is going on around me in TELFORD that google earth is completely  out of date.
Not sure about the Rural Payment Agency....what do they use ?

BrimwoodFarm

  • Joined May 2016
    • Brimwood Farm
    • Facebook
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #10 on: February 12, 2017, 07:12:31 pm »
@juliem have you got any advice on getting the land, having just been through the money side of things?

My parents own 40 acres which they inherited from my grandfather. They've never farmed it themselves, but rented it to tenant farmers for pasture/agricultural. Now they want to pass it to me BEFORE they die...I suppose as your father gifted you the £25k worth of land.

However, when they went to do their wills recently, the solicitor mentioned the issue of CGT on passing me the land before their death and we're now worried it's simply not possible to do that without ending up with a HUGE tax bill.  :-\

juliem

  • Joined Aug 2014
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #11 on: February 12, 2017, 08:29:25 pm »
As long as the land was farmed for agricultural pourposes (proof of tenancy agreement may be required.I just put my father in his latter years had a gentlemans agreement and rented the pasture to a neighbouring farmer) and you continue to use it for agricultural pourposes after it has been gifted I should think you should get agricultural relief. I think capital gains kicks in when the land has development potential .ie housing/barns..I think in a previous post you mentioned building  house.
However I am no expert......you need a solicitor with experience in this field...
As I have stated before my father gifted the land to me when he was 91.....5 years ago. This was done through a solicitor who insisted on us having the land valued which we had to pay £150 for. The solicitor charged £600 to do the transfer.
However when someone dies within 7 years gifts must be declared as it is still technically the deceaseds estate.
My original intention was to avoid inheritance tax as my fathers house together with the land was going to be worth more than the house and the land if sold separately.ie house and 6 acres = £400.k .House on it's own 300k and 6 acres of land=25k.
I was not anticipating getting the value of the land wiped out completely through agricultural relief. Had we not got relief then some monies would have had to be paid..not the 40% but !6 % of the estate over his  allowance.
I would get a good estate agent who has experience of land on your side and develop a good relationship with them.
We are going to rent my fathers house out as my estate agent has now valued it as £250k and if we tried to sell it for anymore the Inland Revenue might want capital gains.
Solicitors charge a % fee on doing probate...indeed from this April probate may be going up to £4000 (it's now £200) for estates over 500k. So I recommend having a go at it yourself..(you can always book a solicitor for 1 hr to check papers ).






BrimwoodFarm

  • Joined May 2016
    • Brimwood Farm
    • Facebook
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #12 on: February 12, 2017, 09:39:50 pm »
Thanks @juliem . Yes - I am looking at building a house there in the future so I expect there will be some tax to pay in one form or another. But just to get some agricultural relief would be good.

It's so frustrating; feels like you have to be rich even to live simply these days.

Anyway, thanks for the advice. :D

juliem

  • Joined Aug 2014
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #13 on: February 12, 2017, 10:02:35 pm »
If you are hoping to get planning permission for agricultural workers holding...then tax position  should be different from getting planning permission for a building plot which can be sold on the open market.....maybe?

BrimwoodFarm

  • Joined May 2016
    • Brimwood Farm
    • Facebook
Re: Agricultural relief on land for inheritance tax pourposes
« Reply #14 on: February 12, 2017, 10:13:57 pm »
Perhaps, I hadn't thought of that actually. I know my folks are going to speak to a specialist so I'll hear what they have to say and take it from there. Obviously, I think the best way will be to get land in my name first and THEN apply for planning in the future. But good idea to be prepared for potential tax costs; I'd hate to take over great grandfather's land, build a home and then find out we're bankrupted by costs.

 

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