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Land and farming partnership agreements

20 October 2015

Business property relief (BPR) is valuable for inheritance tax (IHT) purposes as it has the ability to reduce the value of assets to nil.

Therefore, BPR should be considered when aiming to reduce IHT as it can render assets totally exempt from IHT.

Farmland generally qualifies for 100% relief based on the agricultural value of the land; anything above agricultural value will not be covered.

For IHT relief it is often beneficial for land which is owned personally, but used in a farming partnership, to be included in the partnership. This can ensure that rather than the asset qualifying for 50% BPR when held outside of the partnership, it qualifies for 100% BPR.

Let buildings will not attract BPR if held outside the partnership. If held within the partnership 100% BPR may be available, assuming that the partnership is engaged wholly or mainly in trading.

In addition it is essential to have a well-drafted partnership agreement, as this will illustrate which assets are partnership assets that should qualify for 100% BPR. It should also clarify how the land is owned and confirm how and when each partner, that introduces land into the partnership, can withdraw it.

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Adam Hale BA (Hons), TEP, FALA
Senior associate, solicitor
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