Agricultural relief is available on the agricultural value of agricultural property which is transferred. The agricultural property can be owner-occupied or let. Relief is only due if the transferor has owned the property and it has been occupied for agricultural purposes for a minimum period.
The relief operates in the same as business relief by reducing the value transferred by a transfer of qualifying agricultural property.
Relief is available for transfers
Relief is not normally available if the agricultural property is subject to a binding contract for sale at the time of the transfer.
For the purpose of the relief, agricultural property must be in the UK, Channel Islands, the Isle of Man or the European Economic Area. The term means agricultural land or pasture, but it also includes
A milk quota is broadly a producer's right to sell a fixed number of litres of milk a year without having to pay a penalty.
Where agricultural land, or an interest in agricultural land, is valued and the valuation of the land reflects the benefit of a milk quota, agricultural relief is available on that overall value. More on milk quotas.
The relief applies only to the agricultural value of agricultural property. This is the value the property would have if it could only be used as agricultural property.
The relief does not extend to any other element in the open market value of such property, for example
Agricultural relief is allowable on the agricultural value of farm cottages occupied for agricultural purposes with agricultural land or pasture. To qualify for relief the farm cottage must meet the conditions about the period of occupation and ownership.
If the cottage has a value above its agricultural value because it could be attractive as a second home, for example, that additional value will not attract agricultural relief.
Normally a farm cottage or farmhouse occupied by someone who is not employed in agriculture will not qualify for relief. By concession, a cottage occupied by a retired farm employee or their widow, widower or surviving civil partner is treated as being occupied for agricultural purposes if either
Either 100% or 50%.
Agricultural relief is due at 100% if
Relief is due at a lower rate of 50% in any other case (principally where property is let on a tenancy granted before 1 September 1995 and the transitional provisions do not apply).
In some circumstances land let on a tenancy starting before 10 March 1981 may qualify for relief at 100% on a transfer after that date.
The conditions are that the
You should work out the part to which the relief applies if
Clarissa dies owning let land valued at £250,000. The rate of relief is 50%. Part is non-agricultural, and the agricultural value of the agricultural property transferred is £200,000. A mortgage of £60,000 is secured on the total property being transferred.
|Value of agricultural property||£200,000|
|Less proportion of mortgage applicable
to the agricultural property £ 200,000/£250,000 x £60,000
|Less amount of agricultural relief at 50%||£76,000|
|Chargeable balance after relief||£76,000|
|Value of non-agricultural property
(£250,000 - £200,000)
|Less balance of mortgage (£60,000 - £48,000)||£12,000|
|Total value on which tax is chargeable||£114,000|
Agricultural relief also applies where shares or securities in a company are transferred if
The relief extends to that part of the value of the shares or securities
transferred by a chargeable transfer,
which is attributable to the agricultural
value of qualifying agricultural
In some cases, the value of shares reduces under the rules that apply to sales of related property within three years after death. Then the relief is only available if the shares sold were themselves sufficient to give the transferor control at the time of death.
Yes, there are basic ownership or occupation requirements relating to agricultural property. The relief is only available if the agricultural property was either
Additional tests have to be satisfied where a charge or increased charge to IHT arises because the transferor died within seven years of the transfer.
If, at the time of the second transfer, the property replaces other property, the relief is restricted to that which would have been available had the replacement not occurred.
If the first transfer was a sale at less than the market value, the relief available on the second transfer is proportionally restricted to the element of gift in the first transfer.
The following rules relate to potentially exempt transfers which become chargeable, or where further tax becomes payable on a immediately chargeable transfer, as a result of the transferor's death within seven years of the transfer.
Agricultural relief is available on property, which qualified for relief at the time of the gift, if that property
If the property that was originally given consists of shares in an agricultural company, the relief is only available if the original shares, or those treated by the legislation as if they were the original shares, have been retained throughout the relevant period.
The agricultural property forming part of the company's assets must also have been
If, at the date of the transferor's death, the conditions for relief are satisfied for only a part of the gifted property, a proportionate part of the value that was transferred is reduced.
If the transferee dies before the transferor the conditions for relief have to be satisfied at both the
If the transferee is given shares and, as a result of a reorganisation of share capital or take-over bid, receives other shares, we treat those other shares as the original property.
If, after the gift but before the transferor's death, the transferee receives shares in a company in consideration for the sale to that company of the property that has been given, the shares are treated as the original property.
Where the original agricultural property was disposed of before the transferor's death and the proceeds were used to buy replacement property, the relief is not necessarily lost.
In order to still qualify for relief
The replacement property must also be of such a nature that, if it was transferred by the transferee immediately before the death of the transferor, it would (apart from the minimum period of ownership requirement described above) qualify for relief.
The donee of a potentially exempt transfer (PET) of a farming business may sell the business and replace it with a non-agricultural business. They will be denied agricultural relief on the value transferred by the PET. However, they can claim business relief if the conditions for that relief are satisfied.
In the reverse situation, the farming business acquired by the donee can be relevant business property.
Where tax, or further tax, is potentially payable, as a result of the transferor's death, the rate of relief that applies will depend on the rates in force at the date of death.
This section deals with the relief available where property which would have qualified for relief before the transfer, has been replaced by other property.
The two year occupation condition is satisfied if the properties were occupied by the transferor, for the purposes of agriculture, for a total period of at least two years during the five years immediately before the transfer.
The seven year ownership test is satisfied if the properties were
Yes. Relief cannot exceed what it would have been if the replacement had not occurred.
If business property replaces agricultural property which is part of a farming business, the period of ownership of the original property will be relevant for working out the minimum ownership condition to the replacement property.
Business relief will be available on the replacement if all the conditions for that relief are satisfied.
If a farming business is replaced by a non-agricultural business property, and the former is not eligible for agricultural relief, business relief may be claimed instead if the conditions for that relief are satisfied. More about business relief.
There are exceptions to this; for example, if agricultural land is not part of a farming business any replacement can only qualify for business property relief if it satisfies the minimum ownership conditions in its own right.
If the conditions for both agricultural relief and business relief are satisfied then agricultural relief is available instead of business relief. However, business relief may be available on a transfer of agricultural property which is not eligible for agricultural relief.