The government has been cautioned against making major changes to the inheritance tax (IHT) system on the ground it could lead to major upheaval for farm businesses.
But the Country Land and Business Association has called for small changes to the administration and interpretation of inheritance rules – in particular asking for IHT relief to be available to farmers and landowners who have diversified into furnished holiday lets.
The demands appear in the association’s official response to a review of the IHT framework being carried out by the Office of Tax Simplification.
The main points the CLA makes are:
- The current IHT reliefs of agricultural property relief (APR) and business property relief (BPR) are vitally important to the agricultural industry so working farms do not have to be broken up following a death.
- Farmers are already facing significant change through the replacement of the CAP with a new domestic agricultural policy and major changes to the inheritance regime at this time of uncertainty will make it impossible for individual farming businesses to plan.
- The deadline for settling any IHT liability (currently six months after death) should be realigned so it is the same as the deadline for submitting the relevant IHT paper work (12 months after death).
- Furnished holiday lets are not considered as trading for IHT purpose, even though they are deemed a trade for income tax and capital gains purposes. This is not helpful when many farming businesses have diversified into the tourism sector to build non-agricultural income streams.
- Relief from IHT should be available for any business that undertakes economic activities in order to support diversification.
- If IHT relief is not available to anyone letting out land then the availability for land for tenant farmers could disappear as landowners take ground in-hand. All let land should qualify for 100% relief (currently pre-1995 AHA land is granted a 50% rate and farm business tenancies get 100% relief).
CLA president Tim Breitmeyer said: “Brexit will bring significant and fundamental change for many land-based businesses across the countryside. In order to respond, many will need to invest to increase profitability, productivity and accelerate growth.
“This includes more farm businesses seeking new income streams from activities like tourism that sit alongside their core farming business. It is important those who do this are not penalised by current inheritance tax rules.
“Also, as government policy clearly identifies a switch to encouraging more public good activities on rural land as a core policy objective, it must ensure landowners who respond do not get penalised by the inheritance tax system.
“For example, land dedicated to environmental schemes must benefit from the same reliefs as agricultural land.”