Will my farmhouse qualify for relief from inheritance tax?
This depends on the circumstances of your particular farm. There have been a number of cases about this which set out various tests, including considering the size of the farmhouse compared to the size of the farm and whether it is of a ‘character appropriate’ e.g. is the farmhouse a working farmhouse, or is it a large townhouse which happens to be on a farm.
We can give you peace of mind by advising you on the various tests and the up-to-date legal position, giving you tips to help improve the chances of your farmhouse qualifying. Our experienced team are also able to save clients paying too much inheritance tax by negotiating with HMRC after someone has died.
What happens if I don’t have a Will?
If you don’t have a Will, your estate will be distributed in accordance with the intestacy rules, which set out in strict terms who in your family should benefit. This may mean that it doesn’t go to the people you want it to, or, potentially worse, it goes to people you don’t want it to.
Where you are farming in a partnership but don’t have a written agreement, this can also cause issues when deciding what should form part of the farming partnership and what should fall under the intestacy rules. This uncertainty usually causes family arguments which are often avoidable by having an up to date Will in place.
Typically, under the rules of intestacy, your immediate family will benefit from your estate. However, where an individual has a spouse and children, their whole estate does not necessarily pass to their spouse under the rules of intestacy. Even if your wishes are quite straightforward it’s good to take advice and put a Will in place. Ultimately it will save your family money and give them peace of mind, at a time when you won’t be around to help them make decisions or resolve any disputes.
Why do I need a written partnership agreement?
Without a good partnership agreement, you’re opening yourselves up to real problems and cost when there is a disagreement in the future. Even if there are no disagreements, by structuring the partnership in the right way you will also be able to maximise relief from inheritance tax.
A partnership can be created by verbal agreement and conduct of parties, e.g. how each party acts within the partnership. Where a partnership isn’t in writing, the gaps are filled in by the Partnership Act 1890. As you can imagine this might not fill the gaps as you would expect it to. Even if you have good accounts, a recent case (Ham v Bell) confirmed that these are ‘only evidence’ and do not necessarily prove agreement.
There have been a number of cases recently where partners have had to go to court to agree what was intended by their partnership because they didn’t have a written partnership agreement which covered all of the important points. This is particularly costly and can cause years of anxiety, which will also affect the running of the farm.
We recommend that you sit down and decide what should be part of the partnership assets, how profit should be allocated each year and what should happen when a partner dies or decides to leave, to name just a few. This will give you peace of mind and hopefully save you money in the future.
We wrote a partnership agreement ten years ago, do we need to review it?
It’s always good to review your partnership agreement every 5 -10 years, or when something important happens e.g. purchase of new land, change in structure, or death of a partner.
The tax law changes all of time and it’s important to make sure that the partnership is tax efficient. In addition, you should try to ensure that any changes are picked up in writing. Otherwise it can cause problems in the future, where the partners are relying on verbal discussions and understanding between themselves rather than written agreements. Often recollections fade with time and this can be costly when there is a dispute. A robust partnership agreement should mean that everything is clear from the outset, saving you anxiety and money.
Will my farm have to be valued for the divorce?
Usually yes. Both parties would jointly instruct an agricultural chartered surveyor to value the land, live and dead stock. Also there may be other benefits that need to be valued such as sporting or mineral rights, planning consent and any development potential e.g. for a wind farm. We can assist you in identifying the appropriate expert to value your farm.
Will the farm have to be sold in a divorce?
It’s rare for the court to order a sale of the entire farm. The court will consider if part can be sold off without affecting the viability of the farming business to meet the other party’s needs. The court does however have power to make an order for the farm to be sold.
My son is marrying next year. Can we protect the farm in the event of a divorce, he is a partner in the business?
Yes, the couple can enter into a pre-marital agreement (pre-nuptial) and post-marital agreement. Whilst they are not currently legally binding in the UK, under the Matrimonial Causes Act 1973 they are factors that the court will take into account on divorce. Provided that the agreement is entered into freely by the parties, both have had the opportunity of having legal advice, the agreement is fair and full disclosure of each party’s financial position has been given.
Will my wife get half of all of the assets in a divorce? I have been farming since I was 16 years of age.
Not necessarily. In the case of White and White, which was a landmark decision in 2000 in the House of Lords, the parties had been married for over 30 years. Both came from farming backgrounds. A year before the marriage broke down Mr White acquired a farm by way of inheritance. Their combined wealth at the time of the High Court hearing was £4.5m. Briefly, the court felt that the wife’s needs were met and the existence of the inherited property was a good factor to justify departure from equality, even in the case of a long marriage and in their case a business partnership. As a result the wife was awarded less than half.
My spouse is issuing divorce proceedings; what do I need to do now?
You need advice from a specialist divorce solicitor who understands farming divorces. Our agricultural divorce team can help you.
I granted an agricultural tenancy many years ago but it wasn’t put in writing. What kind of farming agreement is in place?
Agricultural holdings are often held under oral tenancies where the terms are vague or have been forgotten. Likewise, old written tenancies tend to be short and may not include many of the important provisions which are required. There are two main types of agricultural tenancy:
- An Agricultural Holding Tenancy if the tenancy was granted before 1 September 1995 or
- A Farm Business Tenancy if the tenancy was granted after that date.
It is important to check the type of tenancy you have as the two regimes give landlords and tenants different rights and responsibilities and may affect succession rights if the person who had the original tenancy dies
I own 70 acres of land which I rent out. Because I do not farm it myself, is the land subject to inheritance tax when I die and if so, is there anything I can do about it?
If the land is part of a working farm, it is likely to qualify for Agricultural Property Relief, either in part or in full, which could save inheritance tax even where you are renting it out. The qualification for Agricultural Property Relief is that you must have owned it for at least seven years before you die. If you have been renting it out since before September 1st 1995 it may only qualify for 50% relief. Inheritance tax is a complicated area so it is always advisable to seek legal advice.
I have received an Enforcement Notice, can and should I appeal it?
It is possible to appeal against an Enforcement Notice. If you have been served a notice you have one month from the date the notice was served to lodge an appeal to your local Magistrates’ court.
There are many reasons that you may wish to appeal a notice. The notice may not have been correctly addressed and/or served upon you. You may not understand what you are alleged to have done wrong and/or what the regulator requires you to do to put it right. Alternatively, you may not agree that what is alleged is a non-compliance and as such you may consider that the notice has been inappropriately served.
It is always worth checking whether a notice has been properly served. Such notices sit on your enforcement record and can adversely affect your position going forward. Future breach of such a notice is a criminal offence. If a notice has not been properly served then it should be cancelled and removed from your enforcement record. We have successfully challenged such notices for a number of our clients.
If you have been served with a notice and want to know whether or not there are grounds to challenge it then please get in touch with our Food Regulatory team and we will advise you on your options.