Agricultural Property Relief (APR) is an extremely useful relief to limit the payment of inheritance tax on an estate. Using this relief to its potential may result in a significant reduction in the amount of inheritance tax either as a result of lifetime giving or at the time of death.
Careful consideration needs to be given to the qualifying criteria for APR –
Agricultural property is defined as agricultural land or pasture but also specifically includes:
- Woodland, so long as it is occupied with and ancillary to the land and pasture;
- Farm buildings, again, they must be occupied with and ancillary to the land or pasture;
- Farmhouses and cottages but only if they are of a character appropriate to the land or pasture that is in the same occupation (this is discussed in greater detail below); and
(Please be aware that the grazing of horses on land, where the horses are not connected with agriculture would render that land non-agricultural land, therefore APR could not be used).
Period of Ownership or Occupation Required in Order to Qualify for APR includes:
- A requirement for the property to be occupied by the owner for the purposes of agricultural for at least 2 years up to the transfer/death; or
- A requirement for the property to be owned for at least 7 years up to the transfer/death and throughout that period have been occupied by another for agricultural purposes.
For APR to be claimed it is necessary to determine the ‘Agricultural Value’. This means the value of the property if it were subject to a restriction that would mean that it could only be utilised for agricultural purposes. Therefore, in many cases, but by no means all, the open market value will be greater than the agricultural value.
Business Property Relief, another useful relief, can also be utilised to limit the payment of inheritance tax on an estate if APR is not appropriate.