Government Announcement on Agricultural Property Relief (APR)
Agricultural Property Relief (APR) is a valuable tax relief for farming businesses, allowing them where applicable to reduce their liability for Inheritance Tax by up to 100% on qualifying agricultural property.
The recent changes to the government’s financial support schemes for farmers in the Agricultural Transition away from direct payments towards environmentally focused grants with “public money for public goods” had raised concerns over the implications for tax relief as land moving out of agricultural use would no longer be considered agricultural property and therefore potentially not eligible for APR.
To address these concerns, in the Spring Budget 2023, the government announced that it was to run a consultation with a review of the current scope of APR. This week the government announced the outcome to last year’s consultation with a positive response recognising the need to extend APR to farmland placed into qualifying environmental schemes.
The extension to APR will come into effect for transfers (lifetime or on death) from 6th April 2025 where an environmental land management agreement has been in place on or after 6th March 2024.
To qualify, the land must be managed under an agreement/scheme with, or on behalf of, the UK government, a devolved administration, a public body, a local authority or an approved responsible body, and must have been considered qualifying agricultural land for two years prior to entering the agreement.
The update to APR will also cover “character appropriate” farm buildings, farm cottages and farmhouses buildings. In a similar manner to the current criteria for agricultural land, buildings used in connection with qualifying environmental land will qualify for APR where that building is occupied with, and that occupation is ancillary to, the environmental land.
Currently, APR is given on the agricultural value not the market value. The agricultural value being the value as if the property was restricted to a sole agricultural use. If the agricultural land has potential development value in excess of the agricultural value, this excess will not attract APR.
In a similar vein, for land within environmental agreements, the value of the land will be the value of the land as if the property was restricted to its existing environmental use. Hope and development value, where relevant, in excess of the existing use value, will not receive relief. However, as with land in agricultural production, there may be the opportunity for Business Relief, another IHT relief, to apply to the above existing use value.
Want to find out more?
Hobbs Parker Property Consultants can assist with a range of tax planning services for farming business and undertake valuations for Inheritance Tax and Capital Gains Tax calculations. Please do get in touch with our team if you have any further queries.
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