Advising farming clients is often a complex matter with numerous issues to consider and address. Many farmers have an estate which exceeds their nil-rate band allowance, many are concerned about their potential future care costs and many have to wrestle with the problem of how to treat their children fairly when not all may work on the farm or have any interest in carrying on the business. Careful consideration must be given when planning to ensure that advice given in regards to one tax, does not adversely impact on another. It is often useful to take a moment with your farming client to review their whole affairs; legislative changes, or a request from your client to review wills/put in place Lasting Powers of Attorney (LPAs) can provide a good opportunity to take an overview of the whole picture.
When looking at a farmer’s inheritance tax (IHT) position, the availability of Agricultural Property Relief (APR), should be considered. To the extent that an asset qualifies for APR, it will be exempt from IHT. However, the agricultural value and market value of an asset is not always the same. In particular, many practitioners are aware of the long standing problems that farmhouses have caused to the family trying to claim APR on the death of the farmer and there have been numerous cases setting out the law on this. To the extent that an asset does not qualify for APR, Business Property Relief (BPR) may be available to reduce the tax burden and should be considered.
Additionally, in this climate of housing shortages, many farmers may be tempted to sell off land to developers and in this scenario, it may be possible to claim Entrepreneur’s Relief to reduce the amount of Capital Gains Tax (CGT) payable, if the farmer has been in business and owns the assets for a year prior to disposal. However, it may be necessary to restructure matters somewhat before sale as simply selling off a piece of land that is part of a farming business which then continues to operate as before, may not qualify for the relief.
For those advisers who do not have the specialist knowledge needed to advise a farming client comprehensively, case law does suggest that they are obligated to refer the client to a specialist adviser where there is a good reason to do so or they risk being deemed negligent. It is important therefore, for advisers to be able to recognise pertinent issues and to recommend to a client that they seek specialist advice if appropriate. This may mean that a number of advisers need to work together to provide the best outcome for the client.
For those interested in exploring some of these issues further and in gaining practical insight into the day to day issues of taxation and estate planning for farmers, expert speaker Alan Neal’s course ‘Tax and Estate Planning for Farmers and Landowners’ may be of interest: http://www.clt.co.uk/course/tax-and-estate-planning-for-farmers-and-landowners/
This article was submitted to be published by Central Law Training as part of their advertising agreement with Today’s Wills & Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills & Probate.
