As an NFU panel member and with a long standing reputation of providing expert legal advice to farming communities across Cumbria and the north-west, Napthens’ Rural team has an in-depth understanding of the sector.
While it’s true that the majority of our clients are aware of the availability of Agricultural Property Relief (APR) and Business Property Relief( BPR) to reduce the chargeable estate for Inheritance Tax purposes (IHT) – the question is how regularly do you review and consider IHT as part of your business plan? The availability of APR and BPR should not be assumed and needs to be reviewed regularly.
When considering tax planning some of the most common issues that we come across are:
Land has been identified for development/diversification is being considered
While land is being used for agricultural purposes a claim for APR can be submitted, however, if any land has been identified for development or diversification this removes the availability of APR.
In respect of development, the value of the land can significantly increase, which may mean £millions coming into an estate. This this would be subject to IHT on death – charged at 40%.
Even when land is not identified for development but e.g. is on the edge of a village, there can be hope value issues to consider.
Careful planning can not only reduce IHT liability but it enables a review of the business structure to plan for other tax issues. By involving your accountant and solicitor well in advance, a well formed plan can ensure the most tax efficient options are used.
Balancing the split of an estate between farming and non-farming children
Most of my clients with children face this question. It can be difficult when trying to create equalisation between all children, while still allowing farming children to continue farming.
The starting point is to consider the non-farming assets, if any. For example: is there any non-farming property? have funds been built outside the farm? is there a private pension or is there a life policy in place?
If the only assets are farming assets, then there are various solutions available. During planning we look at options of trusts, division of property, options to purchase etc. to try and overcome the problem.
- Plan early
- Maximise tax breaks
- Take advice
So that our clients have the best chance of creating the right plan for their circumstances we have developed Farm Future from Napthens. We understand that no farming business or family is the same, so we have developed a fixed-cost solution giving you access to commercial and personal legal advice in a unique, tailored package.