Inheritance tax, gifts and farms

Sambelina

Hi all, a few questions related to inheritance tax, particularly relating to farms (I realise the rules on farms and IHT are a developing situation, and that at some point we're likely to need to get formal expert advice).

In our case, the farm has been farmed by my parents for 50 years, and they have both spent the whole of that time lives living in the farmhouse together.

1. Do the NRB, RNRB and APR all apply here? If the farmhouse is counted under APR, Would it also be eligible for the RNRB?

2. Do the different bands and reliefs above all just get added together and put against the total value of the estate? For example if a couple had no cash, but a house worth £1 million, is it only the £350,000 (joint) of RNRB that could be put against the house, or the whole £1 million (joint) of NRB and RNRB combined? I feel as though APR is probably separate and can only be put against things that are strictly 'Agricultural', but perhaps it all just gets added to one big pot?

3. If they give cash gifts over their £3000 annual limit, and die within 7 years of giving them, is inheritance tax applicable to those gifts even if the value of the estate comes in under the threshold? They seem to feel that they cant give gifts over £3000 a year as inheritance tax could be due on them, even though the value of their estate is likely to be below the tax threshold.

Thanks for your time.  

Marcon

Sambelina said:

Hi all, a few questions related to inheritance tax, particularly relating to farms (I realise the rules on farms and IHT are a developing situation, and that at some point we're likely to need to get formal expert advice).

In our case, the farm has been farmed by my parents for 50 years, and they have both spent the whole of that time lives living in the farmhouse together.

1. Do the NRB, RNRB and APR all apply here? If the farmhouse is counted under APR, Would it also be eligible for the RNRB?

2. Do the different bands and reliefs above all just get added together and put against the total value of the estate? For example if a couple had no cash, but a house worth £1 million, is it only the £350,000 (joint) of RNRB that could be put against the house, or the whole £1 million (joint) of NRB and RNRB combined? I feel as though APR is probably separate and can only be put against things that are strictly 'Agricultural', but perhaps it all just gets added to one big pot?

3. If they give cash gifts over their £3000 annual limit, and die within 7 years of giving them, is inheritance tax applicable to those gifts even if the value of the estate comes in under the threshold? They seem to feel that they cant give gifts over £3000 a year as inheritance tax could be due on them, even though the value of their estate is likely to be below the tax threshold.

Thanks for your time.  

I think you might do better doing some googling and reading one of the specialist websites for some general guidance - I'm not aware anyone posting here is an agricultural expert, although I could be wrong! There's plenty of useful and accurate stuff out there eg https://www.cla.org.uk/news/changes-to-inheritance-tax-frequently-asked-questions/

poseidon1

Sambelina said:

Hi all, a few questions related to inheritance tax, particularly relating to farms (I realise the rules on farms and IHT are a developing situation, and that at some point we're likely to need to get formal expert advice).

In our case, the farm has been farmed by my parents for 50 years, and they have both spent the whole of that time lives living in the farmhouse together.

1. Do the NRB, RNRB and APR all apply here? If the farmhouse is counted under APR, Would it also be eligible for the RNRB?

2. Do the different bands and reliefs above all just get added together and put against the total value of the estate? For example if a couple had no cash, but a house worth £1 million, is it only the £350,000 (joint) of RNRB that could be put against the house, or the whole £1 million (joint) of NRB and RNRB combined? I feel as though APR is probably separate and can only be put against things that are strictly 'Agricultural', but perhaps it all just gets added to one big pot?

3. If they give cash gifts over their £3000 annual limit, and die within 7 years of giving them, is inheritance tax applicable to those gifts even if the value of the estate comes in under the threshold? They seem to feel that they cant give gifts over £3000 a year as inheritance tax could be due on them, even though the value of their estate is likely to be below the tax threshold.

Thanks for your time.  

You may find this short thread below of interest

https://forums.moneysavingexpert.com/discussion/comment/81273427#Comment_81273427

 Iht reliefs for working farms are far more varied compared to what is available to the general populace.

For example as you will see from the post, a farmhouse can ( as specifically defined) benefit from agricultural property relief as an alternative to the residence nil rate band.

Aspects of the farming business itself  if operated via a limited company , could attract business property relief ( BPR) as an alternative  or in addition to APR.

Specialist  legal and/or tax expertise in advising both by way of pre death tax planning strategies and post death variation ( if appropriate  ) , is absolutely paramount. 

Succession planning in terms of what happens to your father's business on death or if he wishes to step back in retirement, is equally iimportant.

So in this regard how good are his accountants ? Are they  members of ICAEW    ( ie Chartered) , do they have in-house tax experts on estate and succession planning for the farming community, are they plugged into a decent network of lawyers who can  deal with  drafting of appropriate wills and even trusts if that is an appropriate route for the family dynamics?

What I would say, is for business owners generally and farmers in particular,  wandering around the Internet in the hope of gleaning useful tax planning information that might apply to you family circumstances is a bit pointless. You will require bespoke targeted advice that recognises your exact circumstances.

 It is my impression in the thread I shared above that the OP's deceased father did little or no pre death planning, leaving his untutored daughter to navigate for herself an optimum post death outcome for her mother and herself. Your best bet is for the family to determine whether your father's accountants have the expertise to embark on an holistic planning excercise with him, and if not set about finding suitable professionals ASAP.

Finally re your question 3) the £3,000 annual gifts exemption each of your parents are entitled to is unrestricted whether or not their estate is above or below the iht threshold. If they did not use it in the last tax year, then each can now  gift £6,000 this year  ( £12,000 total ) with impunity, since the exemption can be carried forward a year if not used previously. However, I am surprised something this basic  had not been dealt with by their accountant, so even more reason to establish if that firm are appropriate for the estate planning excercise that is necessary here.