Two papers have been published recently highlighting the ongoing debate in regard to land ownership and the tax reliefs available to both businesses and landowners.
The first paper was from Tax Justice UK ‘In Stark Relief – How inheritance tax breaks favour the well-off’, which claimed the current inheritance tax reliefs for business property and agricultural property favour the wealthy, and recommended (amongst other things) that a cap be placed on the amount of relief available.
The second was a Labour party paper ‘Land for the Many’ which talks about abolishing inheritance tax in favour of a lifetime gifts tax, ensuring public registers contain more data relating to land, implementing measures to curb buy to let investors, introducing a progressive property tax and conducting a review of tax exemptions given to landowners. It also talks about the removal of permitted development rights and stricter control over development land.
Both Agricultural Property Relief (APR) and Business Property Relief (BPR) are critically important to businesses of all descriptions to enable them to carry out business succession planning and to stave off the need to sell off crucial business assets or break a business up in order to fund a tax bill upon death.
APR currently provides up to 100% IHT relief when agricultural property is passed on, either as a gift or upon death. By definition, this includes farmland, farmhouses, farm buildings and ancillary woodland used to grow crops, rear animals etc.
It also provides relief for owners of land that is tenanted and enables land to be passed to the next generation with little disturbance all round generated by unwanted tax bills.
BPR provides relief for the owners of a trading business to permit them to pass on their interests in a sole trade, partnership or limited company during their lifetime or on death without suffering a 40% inheritance tax charge.
There are already a number of criteria that have to be met in order to qualify for the relief and a number of restrictions on when it will be available and on which assets.
Both reliefs are vital for many in the farming and agricultural industry and are intrinsically linked to the rural way of life, without which there would be much bigger knock-on effects to the UK’s food production industry, the environment and even climate change. They offer genuine agricultural businesses protection, as well as the opportunity to prosper.
These reliefs allow continuity, and can help small, often family run businesses have certainty of succession, undoubtedly supporting the UK’s economy. Without it, families may face large IHT bills upon the transfer of assets, forcing them to sell all or some of the business and its assets, which could give large companies an ever-increasing share of the rural business sector.
If you operate in the rural sector and have any concerns regarding Inheritance Tax Reliefs, please get in touch with Tax Partner Catherine Desmond. Catherine has extensive experience advising a broad range of clients on a variety of taxation issues, particularly those affecting the rural sector.
