A guide to agricultural property and business property relief

Agricultural property relief allows land and farm buildings to be passed free from inheritance tax either during a lifetime or after a death. This is subject to certain conditions being met; for instance, the land must be owned for at least two years prior to death for HMRC to consider a claim for relief.

When it comes to claiming inheritance tax reliefs, landowners should be aware of the legal distinction between “agricultural use” and “equestrian use” of their land and associated buildings.

For agricultural property relief (‘APR’) from inheritance tax, the only equestrian use that falls within the definition of “agricultural property” is the breeding and rearing of horses on a stud farm, together with the grazing of those breeding horses, horses kept and raised for slaughter and working horses (such as those kept for forestry work or ploughing). All other equestrian activities require the land to have planning permission for equestrian use and must satisfy HMRC’s requirements to qualify for business property relief (‘BPR’) from inheritance tax.

Due to the high level of claims made, HMRC now require livery yard owners to provide “enhanced services” to qualify for BPR. These are essentially hotel services for equine owners, such as feeding, turning in and out, mucking out, worming and so on, on behalf of the livery client.

Landowners also need to be certain that the planning permission granted matches the activities being undertaken on the land, so that HMRC can consider an application.

“Agricultural” and “agricultural equine” planning permission only permit horses to be kept upon the land for grazing purposes. Additional activities such as rugging horses, riding on the land and supplemental feeding all require “full equestrian” planning permission. Failing to match the planning permission with the use of the land could result in executors not being able to claim either APR or BPR upon a person’s death.

It is also equally important to ensure that a will is structured in a way that allows APR and/or BPR to be successfully claimed. Simple wills leaving everything to a spouse and then to children will not necessarily be the most tax efficient way of leaving an estate to loved ones if there are agricultural or equine business interests involved.

Remember, a will can include specific guidance as to how a business should operate following death or detail an option to purchase a business or set out wishes for the animals to be given to a loved one or sold.

To discuss the creation of a tax-efficient, personalised will and to take advice to ensure that your executors have the best chance of successfully claiming the necessary inheritance tax reliefs upon your death, please contact our team. We would be pleased to assist you.

Our Legal 500-rated wills, trusts & probate team has the expertise to help you plan for the future and guide you through any difficult challenges that may arise, including those relating to agriculture and business property relief.