Agricultural Property Relief

Agricultural property relief is the relief from tax when a farm or other agricultural assets are either given away or are inherited following a death. If your agricultural assets and business meet the relevant criteria and qualify for agricultural property relief, it could benefit your family at a time when they need it most.

When is agricultural property relief available?

It is available on the value of agricultural property or assets which are transferred. This can either be on death or during a person’s lifetime as a gift. The relief applies to the agricultural value of the land and may be claimed at either 100% or 50%. As long as certain criteria have been met in order to qualify.

What criteria does agricultural property have to meet to qualify for relief?

The main criteria to be satisfied are:

  • That the land is “agricultural”;
  • The land has been occupied for agricultural purposes;
  • Certain ownership periods must apply. Two years if the farmer owns the land, seven years if a tenant runs the farm.

The definition of “agricultural” means the value of the property if it were subject to a perpetual covenant prohibiting its use for anything other than as a agricultural property.

Examples of properties or assets not qualifying are:

  • Land with development value. The development value will not qualify for agricultural property relief (although it may qualify for business property relief);
  • Farmhouses have amenity value, particularly properties accessible to large urban centres.

To qualify, buildings must be occupied with “agricultural land or pasture”. This must be used for a purpose ancillary to the purpose of that land.

What percentage of tax relief is available?

The relief can either be 100% or 50% depending on who has the right to vacant possession.  If there is an immediate right to vacant possession or it can be obtained within 24 months then the full relief may be available.

The lower rate of relief (50%), may apply to tenanted land if there is an old lease in place prior to 1 September 1995. It may also apply if the farm owner cannot get vacant possession within 24 months.

What property / assets are classed as agricultural?

Agricultural properties and assets are defined as “agricultural land or pasture” and include any woodland or buildings that are used in connection with the intensive rearing of livestock or fish. It also includes cottages, farm buildings and farmhouses together with the land occupied with them, as these are a character which is appropriate to the property.

In order to qualify for agricultural property relief the land must be “of a character appropriate to the property”. The cottages, farm buildings or farmhouses need to be proportionate in size to the nature and size of the farming activity.

It is important to consider carefully how assets are given as gifts. Thus applies both in lifetime and on death. Gifts may fail if you reserve a benefit in the asset. They can also cause a tax liability for the estate. You should always seek advice from your solicitor before you give anything away.

For more information on agricultural property relief, please contact our specialist agricultural team today.