GONE is
the general rule that agricultural land and buildings are exempt from
inheritance tax. Every opportunity to repay public debt is being seized and now
farmhouses are in the firing line.
Occupiers
of farmhouses now have to prove that they still have an active role on the
farm. Retired farmers who reside in the family farmhouse will find that
on-death their estate will attract inheritance tax at the full market value,
rather than the lower agricultural value, for the property.
“Careful
planning is required,” accountant Paul Farrow of Mapus-Smith & Lemmon said.
“The last thing any farming family wants is to have to sell the farm to pay the
inheritance tax and this latest development could mean just that.
“It’s not only
about dad retiring and staying put, it also affects farmers that have made
contract farming agreements for others to do the work while they stay on in
what is effectively the family home.”
The market
value of property tends to be higher than the agricultural value and HM Revenue
and Customs normally bases the agricultural value at 70% of the market value.
As a result, careful planning should be undertaken to ensure that agricultural
valuations are protected.
“It is
worth taking professional advice to ensure property is indisputably
agricultural and therefore exempt from inheritance tax,” Mr Farrow said.
“Another can of worms is capital gains tax which may be payable should the
family need to sell assets.”
For more information call Paul
Farrow at Mapus-Smith & Lemmon in Downham Market on 01366 383300.
