With the chancellor’s next statement due in the spring of 2021 – and changes to Inheritance Tax administration in the pipeline – now is a good to review your Inheritance Tax and succession plans.
In 2019 the governement’s Office of Tax Simplification recommended streamlining Inheritence Tax (IHT) administration. But in doing so, it may reduce some other favourable reliefs for farmers.
The current IHT legislation gives farmers up to 100% IHT releif on agricultural land and agricultural property assets. Other assets such as diversified enterprises can also qualify for up to 100% business property relief (BPR) as part of the overall farming business that is at least 50% trading. These reliefs can apply on lifetime transfers as well as on death, where certain conditions are met.
Transfers on death also qualify for Capital Gains Tax-free uplift, where gains are effectively cleared out.
The proposals recommended by the Office of Tax Simplification for altering the trading test for business property relief to align it to the CGT test could leave farmers ineligible for 100% BPR. A timely review of your circumstances and plans for the future is therefore a prudent step.