APR on purchased land

iamnotalawyer

My uncle just left me some land in his will.  He bought it in 1994 and rented it out under a farm business tenancy in 1998 to a tenant who is still farming it today.  There was an earlier tenant between 1994 and 1998.  My uncle was a farmer before he retired but he never farmed this particular piece of land himself.

Does this land qualify for Agricultural Property Relief?  There is a paragraph headed "property received by transfer" on the gov.uk slash guidance slash agricultural-relief-on-inheritance-tax web page that makes me think not.  I can answer all the questions on IHT414 no problem but I am worried HMRC may come back with more questions, ultimately rejecting the APR application, and this could delay probate.  It might be wiser not to apply for APR on this land.

Any advice?  TIA 

Bookworm225

why do you think you don't meet the condition?
uncle owned it, uncle let it, 
did tenant use it for agricultural purposes? "Simple" yes/no

Inheritance tax and farms | Institute for Fiscal Studies
"In the case of agricultural property, relief applies in full to property held for more than two years, if farmed by the owner, but for property rented out the minimum holding period to get inheritance tax relief is seven years"

IHTM24070 - Occupation: Introduction - HMRC internal manual - GOV.UK
Owned by the deceased/transferor throughout the seven years immediately preceding the transfer and the property must have been occupied (IHTM24071) throughout the period for the purposes of agriculture (IHTM24060). The identity of the occupier does not matter, but the continuity of such occupation is vital.

iamnotalawyer

It was just the bulleted conditions on the gov.uk guidance web page.  This forum will not allow me to post links yet!

If the property was originally acquired through a transfer, the following statements must all be true:

• the property qualified for Agricultural Relief at the date of the first transfer

• the property was occupied for agricultural purposes by either:

  • the person making the later transfer
  • the personal representatives of the person the property originally came from

I had not seen the manual you linked.   The above bullets are a gross over simplification of the full rules.  Looking at the manual, the above bullets seem to come from IHTM24131 which applies to successive transfers before a time limit has elapsed.

Bookworm225

iamnotalawyer said:

It was just the bulleted conditions on the gov.uk guidance web page.  This forum will not allow me to post links yet!

If the property was originally acquired through a transfer, the following statements must all be true:

• the property qualified for Agricultural Relief at the date of the first transfer

• the property was occupied for agricultural purposes by either:

  • the person making the later transfer
  • the personal representatives of the person the property originally came from

I had not seen the manual you linked.   The above bullets are a gross over simplification of the full rules.  Looking at the manual, the above bullets seem to come from IHTM24131 which applies to successive transfers before a time limit has elapsed.

yes the .Gov website is so dumbed down it can be rather misleading and is best avoided

 only you can make the decision but is DIY the most appropriate way to do probate on this estate? 
perhaps pay for professional help given I assume the estate is large enough for there to be IHT at stake if you get it wrong?

Jeremy535897

The law is perfectly clear on the subject, so far as your father's estate is concerned.
Section 116 IHTA 1984:

(1)Where the whole or part of the value transferred by a transfer of value is attributable to the agricultural value of agricultural property, the whole or that part of the value transferred shall be treated as reduced by the appropriate percentage, but subject to the following provisions of this Chapter.

(2)The appropriate percentage is 100 per cent. if —

(a)the interest of the transferor in the property immediately before the transfer carries the right to vacant possession or the right to obtain it within the next twelve months, or

(b)the transferor has been beneficially entitled to that interest since before 10th March 1981 and the conditions set out in subsection (3) below are satisfied; or

(c)the interest of the transferor in the property immediately before the transfer does not carry either of the rights mentioned in paragraph (a) above because the property is let on a tenancy beginning on or after 1st September 1995;

and, subject to subsection (4) below, it is 50 per cent. in any other case.

The FBT commenced in 1998 (the earlier tenancy is irrelevant) so (c) applies.

Section 117 then says:

Subject to the following provisions of this Chapter, section 116 above does not apply to any agricultural property unless—

(a)it was occupied by the transferor for the purposes of agriculture throughout the period of two years ending with the date of the transfer, or

(b)it was owned by him throughout the period of seven years ending with that date and was throughout that period occupied (by him or another) for the purposes of agriculture.

You will only get APR (should you die or give it away) after 2 years if you farm it, or after 7 years if you let it.