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Landed Estates and Inheritance Tax Relief – A Rocky Road Ahead?

Over the last fifteen years, there has been huge pressure on estates to diversify, take land back in hand, sort out their housing stock and explore ways of commercialising the estate.  The pressure on estates continues, we have the unknown definition regarding “the active farmer” test, woodland replanting grants have been withdrawn (unless there are plant health issues) and recent press coverage is suggesting that we could well face a review of capital taxes and, in particular, the reliefs associated with Inheritance Tax.

When the Labour Party came to power in 1997, many firms of solicitors, accountants and land agents foresaw the withdrawal of Agricultural Property Relief (APR), in respect of Inheritance Tax, as a real threat.

Every year, articles were written advising clients to take steps to protect their position, prior to the next budget and new structures in the form of limited liability partnerships and limited companies were looked into and, in certain cases, introduced.

However, we still have APR and a lot of focus has been put on the surrender and re-grant of Agricultural Holdings Act Tenancies, together with their possible replacement with Farm Business Tenancies.

We now face an election in May 2015 and there can be no doubt that the incoming Government will continue to face the pressures facing the current Government.  Revenue will be needed and the tax regime will be reappraised, the question over APR’s life expectancy will undoubtedly rear its head in the run up to the election.

Accordingly, prudent planning in respect of ownership structures, in-hand farming businesses, contract farming agreements and share farming arrangements all have their place on the list of options available.  In the past, reliefs associated with business and business risk have been favoured, whilst there can be no guarantee going forward, a short review now could avoid a rushed decision in the future.

David Gray, Chairman, GSC Grays


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