Agriculture and Rural business legal handbook
Is there a threat to agricultural and business reliefs?
HMRC published a paper last year about Inheritance Tax (IHT) reliefs and exemptions which affect estate planning matters, particularly with applicability to agricultural and business assets. For many, Agricultural Property Relief (APR) and Business Relief (BR) help with succession planning to ensure agricultural and business assets pass down the generations with little IHT being payable. Many who inherit these types of assets keep them, rather than sell them. There are however of course individuals who invest in these assets for the sole purpose of utilising the IHT relief.
For some time, there have been rumours that APR and BR will be adapted, with some commentators suggesting the adjustments will be less favourable. It is not however clear whether these proposals will come into effect but it goes without saying, now is an appropriate time to review your succession planning matters whilst the reliefs are still available in full.
Individuals who hold assets eligible for APR or BR should ensure provision is made in their will to pass these assets to non-exempt beneficiaries such as children or other family members, rather than spouses who are exempt for IHT purposes to ensure the relief is not wasted. The risk is that if you leave APR or BR assets directly to your spouse, either a) the relief will not be available when they die or b) the relief may have changed, making it less favourable.
It may well be that your spouse needs the assets and rather than passing these outright to non-exempt beneficiaries, the assets can pass into a trust set up in your will including your spouse as a potential beneficiary of the trust so they can continue to benefit from the capital and income, should they need to do so. The decision about this would be up to the trustees’ discretion but there is nothing to prevent your spouse from being a trustee. So long as APR and BR continue to be available, the assets can remain warehoused by the trust without ongoing IHT charges and should the relief cease, the assets can be distributed to your spouse and the spouse exemption claimed.
It is likely that HMRC will address APR and BR during the year ahead (2018) as well as numerous other estate and succession planning reliefs. The key with succession planning is keeping your estate under review and if you would like any assistance with this, please contact a member of our Private Client team.
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