A comparison of asset investments in farmland, business assets and shares for Inheritance Tax relief purposes. A presentation at the Harper Adams University Rural Research Conference, 18 April 2018

1. Agricultural Property Relief in
perspective - a comparison
of asset investment classes
Charles Cowap
Harper Adams Rural
Research Conference
18 April 2018

2. Assets
compared
Context
The Tax Reliefs
How much shall we spend?
The impact of the reliefs
So what?

3. Context
• Agricultural Property Relief in the spotlight ……
• Along with feather-bedding CAP subsidies, relief
from rates and red diesel ……
• A new 25 year Environment Plan
• And a Command Paper, Health and Harmony …..

4. Market Value
for IHT
• Section 160, IHTA1984
“.. The value at any time of any property shall for
the purposes of this Act be the price which the
property might reasonably be expected to
fetch if sold in the open market at that time;
but that price shall not be assumed to be
reduced on the ground that the whole property
is to be placed on the market at one and the
same time”

5. AGRICULTURAL
PROPERTY
RELIEF
Relieves Agricultural Value:
Rates:
100% Property owned for 2 yrs
In possession, or
Right to possession in 12 (24)
months
50% Property let before 1.9.95
Owned for 7 yrs
Occupied for agric. purposes
100% Property let since 1.9.95
Owned for 7 yrs

6. Agricultural
Property,
s115(2)
“.. ‘agricultural property’ means agricultural land
or pasture and includes woodland and any
building used in connection with the intensive
rearing of livestock or fish if the woodland or
building is occupied with agricultural land or
pasture and the occupation is ancillary to that
of the agricultural land or pasture; and also
includes such cottages, farm buildings and
farmhouses, together with the land occupied
with them, as are of a character appropriate to
the property”

7. Business Property
Relief

8. BUSINESS
PROPERTY
RELIEF
• IHTA 1984: ss 103-114
• Assets used in a business
• Rate: 100% or 50%
• Minimum ownership 2 years
• Important to distinguish Investment Businesses
• These are not eligible for Relief
• Generally, letting of land and property is regarded as
Investment Business
• Some investment activity within a conventional
business may be eligible for Relief
• Farmer
• Brander

9. Relevant business property (s105)
property consisting of a business or interest in a business
…….
any unquoted shares in a company ……..
This includes AIM shares ….

10. The Key Phrase
“A business or interest in a business …
are not relevant business property if the business …
consists wholly or mainly of …
making or holding investments”
Section 105(3) IHTA1984

11. Interplay of APR and BPR
APR is claimed first on
Agricultural Value
01
BPR may then be available on
balance of value of eligible
Business Property
02

12. How much shall we spend?

13. Number of entries: 1,087.00
Minimum size (acres) 0.10
Maximum size (acres) 11,105.00
Average size (acres) 94.73
Total area (acres) 102,972.62
RICS RAU Farmland Market Survey 2017

14. Minimum price 3,000.00
Maximum price 45,000,000.00
Average price 1,045,092.87
Total price 1,050,318,335.00
Number of transactions 1,005.00
RICS RAU Farmland Market Survey 2017

15. So let’s say £1
million for 90
to 100 acres

16. APR
Permutations
Owned and farmed: APR
@ 100%
Owned and contract
farmed: APR @ 100%?
Owned and let: APR at
100% if on or after
1.9.1995
But only 50% if let before
1.9.1995
And this relief is restricted
to Agricultural Value
•But BPR may be available on
balance if the asset qualifies …..

17. Other
investment
opportunites
Direct trading
Stock Exchange Listed Investments
AIM shares
Cash, bonds etc

18. FTSE All
Share 2008
to 2018
(April)

19. FTSE AIM
All Share
2008 to
2018
(April)

20. So:
Farmland: APR on
Agricultural Value – may be
no IHT to pay
Direct business: BPR on
market value – no IHT to pay
Listed shares on Stock
Exchange: IHT on Market
Value, 40%
AIM shares: may be no IHT
to pay if qualify for BPR
(non-investment businesses)
Cash deposits, bonds etc:
IHT on Market Value, 40%
Wider benefits of
farmland/rural investment –
• 25 YEP
• Health and Harmony Command
Paper

21. Thank you – Q&A

22. In-house CPD programmes, professional-technical updates,
organisational consultancy, and more:
 cdcowap@gmail.com
 07947 706505
Twitter: @charlescowap
Blog: http://charlescowap.wordpress.com/
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