Changes to Inheritance Tax Could Seriously Impact on Farming

The Office of Tax Simplification has launched a consultation on the review of Inheritance Tax (IHT).

The review explores opportunities across the existing legislative framework to simplify the IHT rules, and also the processes through which taxpayers interact with HMRC in relation to IHT. The OTS is asking both for individual responses and responses by survey.


The review covers the current system of IHT relief for farming businesses including Agricultural Property Relief (APR), Business Property Relief (BPR), Capital Gains Tax (CGT) and the CGT uplift rules. The review asks whether the availability of these reliefs affects or distorts farming business decisions.

David Chismon, Partner, Saffery Champness, and a member of the firm’s Landed Estates and Rural Business Group, says:
" This is an important consultation, and its conclusions and any decisions to simplify IHT following that will have significant implications for farming businesses, how they are managed, how they affect timing of sale or transfer of a farming business, and how that business is passed on to the next generation.

The review also raises questions specifically over: the choice for farm owners to let out farmland versus farming it themselves or via a contract farming arrangement; habitation and use of the farmhouse; the different choices of business entity for the farm (eg a corporate entity, partnership, unincorporated business); and the structure of the business (eg how to diversify or hold non-trading assets).

The consultation also asks whether the criteria for a farmhouse or the process of determining the agricultural value of the farmhouse could be simplified and if so how; what if any complexities arise from the fact that BPR and APR overlap, at least in part; what discrepancies there are in the way that they operate; and whether it would help if APR was replaced by BPR or they were merged?

Saffery Champness

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