How Farmers Can Claim Inheritance Tax Relief

A new tribunal ruling has shown the importance of farmers keeping up farming activities in later life to claim thousands of pounds in inheritance tax relief after they die, a rural expert has said.

Rebecca Ruck Keene, head of rural services for the South Central region at leading property consultancy Fisher German, made the comments after the case of deceased farmer Thomas Gill, who owned a small farm in Lancashire.

Rebecca Ruck Keene

Rebecca Ruck Keene

Although he was very active on the farm in the past, in later life Mr Gill did not own any animals and allowed neighbouring farmers to graze their livestock on his land – although he still checked on the livestock every day and helped maintain the land.

When he died, his executors claimed Agriculture Property Relief (APR), paid to working farms, and Business Property Relief (BPR), paid to working businesses that are not simply ‘investments’.

But HMRC initially refused both APR and BPR on the property as they argued Mr Gill was not using the farm for agriculture and that it was an investment rather than a working business.

However, at a First-Tier Tribunal, a judge ruled the property was in fact eligible for APR and BPR, as the farming activity on Mr Gill’s farm was enough to qualify for APR, and the activity on the farm implied it was much more than simply an ‘investment’.

In the wake of this tribunal, Rebecca has advised farmers to be as active as possible on their farms, and keep evidence of any kind of grazing activities to make it clear to HMRC that their farm is still being used.

She said:
“This tribunal has shown how important it is for farmers to document their grazing arrangements to show they are still actively farming the land in order to claim relief on inheritance tax.

“They should continue to undertake as much of the farming work as they can, which may be through the use of contractors provided that the farmer is paying for them and instructing them.

“If farmers do nothing but collect a grazing fee, there may be a risk that HMRC will not consider them to be farming the land, which would result in their farmhouses not being eligible for BPR or APR.

“Furthermore, there may be a risk that their land would not benefit from BPR, meaning that any non-agricultural value would be subject to inheritance tax.

“As long as farmers are careful, they can rest assured that APR and BPR will apply to their property, meaning their relatives will inherit far more than they might otherwise have been able to.”

Fisher German

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