5 September 1997

Advantages for family partnerships

IF YOU are farming under a "family" tenancy, converting it to an FBT could yield big tax savings.

But you better act soon, and ideally before the next budget in the spring, says Grant Thorntons Vicki Oliver.

Family tenancies, many of which were established in the 1980s and earlier as a means of devaluing land and cutting tax liabilities, remain widespread.

Father, for example, might be the owner and landlord, with the farm rented to a partnership in which he, and his children, are partners.

But such land typically attracts agricultural property relief on inheritance tax of only 50%. For FBTs, the figure is 100%, assuming the asset has been owned for seven years or occupied for two.

"On land worth £500,000, making the change could mean a tax saving of £100,000," says Ms Oliver.

"While the next budget could see an across-the-board cut in reliefs, it is unlikely that FBTs will attract less relief than vacant land."

Moving away from the family arrangement could be disadvantageous from a capital gains tax point of view, so it is always best to take professional advice, warns Ms Oliver.

"But for those planning to hand land on down the generations, rather than sell it, it can cut tax bills."