2 Acres of Agricultural Land - Pass on now, or later?

manyfluffyclouds

My Parents have owned a field for over 50 years (2 Acres). For the last 35 years it's realized a small amount of rental income from grazing 2 horses.

Managing the rental is beginning to cause them stress (80's and 90's in age), and they have told myself and sibling that they would like to transfer the ownership to us (to own together). They also feel this may help reduce the total tax payable on their estate.

They don't "need" the money - they can afford to give it away and it would give them some pleasure to know that the field was still in the family

Self and sibling don't "need" the money (or the asset), though it's always nice to have additional savings. Neither of us (or our partners) are in receipt of any means-tested benefits and are unlikely to be in the future (barring unforeseen circumstances).

We have no real idea of the current value. Ag land near us goes for a typical minimum of £10k / acre. But on a good day it could fetch double or more if someone nearby really wanted it.

It was purchased for £2K in 1972

They have no other property than a fully owned house. and the total value of their estate (barring care costs if needed in future) would be in region of £1000k - but it could feasibly flip over into IHT band.

IMO the chance of one of them surviving 7 years beyond the gift is at least 50%, and the chance of their estate exceeding the threshold for IHT is a bit greater than 50%

I think it would make them happier for us to accept the offer., but I think it might be wiser to leave the situation as it is with them owning it.

There's one further complication - and deep down this will be the reason they haven't sold it in the past. over the decades there have been several attempts (by others) to develop the area in which that land is based. They've always hoped it would turn a very healthy profit for the family, and would be upset if they (or we) sold it, and a few years later is was granted planning permission.

Our Questions:
Is there capital gains tax to be paid on Agricultural land gifted between family members?
If so, i guess it we would have to get it valued, which would be an expense in itself.

From a future tax perspective, does anyone want to discuss the pro's and con's of leaving the current status-quo vs taking up the gift? I don't think the land (or their estate) is valuable enough to be paying for specialist agricultural tax planning - I've done some googling and it seems complex.

Finally, to avoid complications of joint ownership, I'd consider buying out my sibling at point of transfer, but if i did that i'd probably want to come up with agreement to split any hypothetical future land development profits between our mutual children.

Thanks for reading

Brie

Isn't it next year when IHT will be attached to agricultural property? Might be a good reason to sell now perhaps? Would the people that have the horses be interested??

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82012476#Comment_82012476

I don’t think a field used to graze horses is IHT exempt as it is not classed as agricultural use.

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm24062

I am pretty sure CGT would apply if they gift it to connected people.

kity_kitty388

The development hope is tricky. If you sell later for a profit, you could owe Capital Gains Tax on the increase from the value at the time of the gift. That might wipe out any IHT saving.

poseidon1

HMRC specifically address the issue of land let as grazing for horses and unless in connection with an overt business activity ( rather than pure leisure by the tenant) such as a stud farm or livery, neither APR or BPR will be available to shelter any value from IHT - see below

https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm24068

Capital gains tax will almost certainly be in point on a gift to the OP , although it will be possible to use a March 1982 revaluation rather 1972 cost, as a starting point.

However the hassle of your parents having to pay any CGT at all would seem to suggest keep it until death thereby erasing all taxable gains at that point.

One of their reasons for the transfer, is they no longer want the effort and hassle involved in the rental arrangement. Assuming you were willing to take on the work if the property were gifted to you, why not take on that task but without the intervening gift?