MORE SCOTTISH farmers than ever before are falling into the inheritance tax net, according to NFU Mutual.
Higher property prices and diversification, coupled with tighter interpretation of the inheritance tax rules by the Inland Revenue, mean that inheritance tax planning is of growing importance to Scottish farming families, said Paul Paton, NFU Mutual life manager for Scotland.
Speaking at a seminar at the Royal Highland Show, Mr Paton said: “A generation ago, inheritance tax was something few farmers needed to worry about.
“Today, however, higher property prices combined with stricter Inland Revenue rules and the rush to diversify means that far more Scottish farming families need to plan ahead to avoid being hit by the tax.
Although agricultural relief could remove farm land and farm buildings from the inheritance tax equation, farmhouses could now be liable for Inheritance Tax.
“Also at risk is the retired farmer who lets his land on a Farm Business Tenancy but remains in the farmhouse,” said Mr Paton.
Diversification of the farm business could also have an impact on the availability of agricultural property relief on farmland and buildings, he added.
There were, however, options available to help farmers minimise or completely remove their estates from the inheritance tax bracket.
“Among these is using will trusts to make the most of the farmer and spouse’s IHT-free allowances, and making life time gifts,” he said.