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Agricultural Property Relief in perspective: a comparison of asset classes


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A comparison of asset investments in farmland, business assets and shares for Inheritance Tax relief purposes. A presentation at the Harper Adams University Rural Research Conference, 18 April 2018

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Agricultural Property Relief in perspective: a comparison of asset classes

  1. 1. Agricultural Property Relief in perspective - a comparison of asset investment classes Charles Cowap Harper Adams Rural Research Conference 18 April 2018
  2. 2. Assets compared Context The Tax Reliefs How much shall we spend? The impact of the reliefs So what?
  3. 3. Context • Agricultural Property Relief in the spotlight …… • Along with feather-bedding CAP subsidies, relief from rates and red diesel …… • A new 25 year Environment Plan • And a Command Paper, Health and Harmony …..
  4. 4. Market Value for IHT • Section 160, IHTA1984 “.. The value at any time of any property shall for the purposes of this Act be the price which the property might reasonably be expected to fetch if sold in the open market at that time; but that price shall not be assumed to be reduced on the ground that the whole property is to be placed on the market at one and the same time”
  5. 5. AGRICULTURAL PROPERTY RELIEF Relieves Agricultural Value: Rates: 100% Property owned for 2 yrs In possession, or Right to possession in 12 (24) months 50% Property let before 1.9.95 Owned for 7 yrs Occupied for agric. purposes 100% Property let since 1.9.95 Owned for 7 yrs
  6. 6. Agricultural Property, s115(2) “.. ‘agricultural property’ means agricultural land or pasture and includes woodland and any building used in connection with the intensive rearing of livestock or fish if the woodland or building is occupied with agricultural land or pasture and the occupation is ancillary to that of the agricultural land or pasture; and also includes such cottages, farm buildings and farmhouses, together with the land occupied with them, as are of a character appropriate to the property”
  7. 7. Business Property Relief
  8. 8. BUSINESS PROPERTY RELIEF • IHTA 1984: ss 103-114 • Assets used in a business • Rate: 100% or 50% • Minimum ownership 2 years • Important to distinguish Investment Businesses • These are not eligible for Relief • Generally, letting of land and property is regarded as Investment Business • Some investment activity within a conventional business may be eligible for Relief • Farmer • Brander
  9. 9. Relevant business property (s105) property consisting of a business or interest in a business ……. any unquoted shares in a company …….. This includes AIM shares ….
  10. 10. The Key Phrase “A business or interest in a business … are not relevant business property if the business … consists wholly or mainly of … making or holding investments” Section 105(3) IHTA1984
  11. 11. Interplay of APR and BPR APR is claimed first on Agricultural Value 01 BPR may then be available on balance of value of eligible Business Property 02
  12. 12. How much shall we spend?
  13. 13. Number of entries: 1,087.00 Minimum size (acres) 0.10 Maximum size (acres) 11,105.00 Average size (acres) 94.73 Total area (acres) 102,972.62 RICS RAU Farmland Market Survey 2017
  14. 14. Minimum price 3,000.00 Maximum price 45,000,000.00 Average price 1,045,092.87 Total price 1,050,318,335.00 Number of transactions 1,005.00 RICS RAU Farmland Market Survey 2017
  15. 15. So let’s say £1 million for 90 to 100 acres
  16. 16. APR Permutations Owned and farmed: APR @ 100% Owned and contract farmed: APR @ 100%? Owned and let: APR at 100% if on or after 1.9.1995 But only 50% if let before 1.9.1995 And this relief is restricted to Agricultural Value •But BPR may be available on balance if the asset qualifies …..
  17. 17. Other investment opportunites Direct trading Stock Exchange Listed Investments AIM shares Cash, bonds etc
  18. 18. FTSE All Share 2008 to 2018 (April)
  19. 19. FTSE AIM All Share 2008 to 2018 (April)
  20. 20. So: Farmland: APR on Agricultural Value – may be no IHT to pay Direct business: BPR on market value – no IHT to pay Listed shares on Stock Exchange: IHT on Market Value, 40% AIM shares: may be no IHT to pay if qualify for BPR (non-investment businesses) Cash deposits, bonds etc: IHT on Market Value, 40% Wider benefits of farmland/rural investment – • 25 YEP • Health and Harmony Command Paper
  21. 21. Thank you – Q&A
  22. 22. In-house CPD programmes, professional-technical updates, organisational consultancy, and more:   07947 706505 Twitter: @charlescowap Blog: Slideshare: Translating new knowledge for rural professional practice