Inheritance tax query APR

retirednurse

My first post I am not sure if this is the correct place for it. Its a complicated subject but I need some help and advise to confirm what the (very expensive) professionals are telling me.

My father is a farmer in partnership with my mother they lived in the farmhouse on the farm and were and are still farming.

My brother has worked on the farm since 1970 and lives in a second farmhouse owned by my parents (obtained when they bought the neighbors farm many years ago) and farms 40 acres of my parents land as a farmer in his own right as well as farming an adjoining 50 acres of his own.
He also works full time on the farm as a contract farm worker. He pays no rent and does not have a tenancy agreement for his living in the second farm house.

My mother died in 2013. Although the 2 farm houses have always been and are still being used for farming by my father and brother my professional advisers are saying the second farm house where my brother lives will not get agriculture property relief leading to a large Inheritance tax bill either now or on my fathers death. A tax bill will put them out of business as they will have to sell something to pay it.

Are my advisers giving me the correct advice or is my brothers house eligible for APR and is there a way to guarantee APR on the second farmhouse.
Or is there somewhere else I should ask this question.

Thanks for looking and apologies if this is the wrong place to ask this question.
A very concerned retired nurse

madbadrob

I would have no idea but I am sure your financial advisor would know what he is talking about. If in doubt speak to another and get a second opinion. It may pay to visit your local CAB and ask them for free.

The option could be to have your brother by the farm house from them but he would have to pay the going rate. This wouldnt alleviate the IHT issues though.

Rob

getmore4less

This is a specialist area that needs specialist advice

You could try the Tax board here or farming boards wherever they are.

Or try having a go yourself on HMRC site at least that way you will know the basics and the terminology

These might be a start
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/agricultural-relief.htm
http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM24000.htm
http://www.voa.gov.uk/corporate/Publications/Manuals/InheritanceTaxManual/pnotes/ze-iht-man-pn10-intro.html

Mattygroves2

You do need to get proper advice (and maybe two opinions) but even if there is no APR then you still have the £650k IHT allowance before tax is payable and everything that qualifies for APR doesn't count towards that.

One other option would be for your father to give your brother the house and then if he lives 7 years there is no IHT however he would probably have to pay CGT so maybe not too much of a saving.

madbadrob

Hed only pay CGT if he chose to sell

Rob

troubleinparadise

There are specific rules peculiar to agricultural land and property ownerships.

Seek professional advice from an accountant and solicitor who specialise in this area.

Mattygroves2

madbadrob wrote: »

Hed only pay CGT if he chose to sell

Rob

If you gift a property to a connected party then CGT is payable at mArket value even if no cash changes hands. So if father gifted to son there would be a CGT disposal and tax would be payable if the gain was big enough.

madbadrob

Wouldnt the CGT bill be liable then to the person gifting the property rather than the son who gained the property

Rob

Mattygroves2

madbadrob wrote: »

Wouldnt the CGT bill be liable then to the person gifting the property rather than the son who gained the property

Rob

Yes it would fall to the father but probably at 28% (or maybe 18%) rather than 40% potential IHT.