UK Treasury should extend inheritance tax relief, says CAAV

The Treasury should go ahead with the European Commission’s request for the UK to amend its rules for land that qualifies for inheritance tax relief, according to Jeremy Moody of the Central Association of Agricultural Valuers.

Currently the relief is limited to agricultural property within the UK, but the EU says this dissuades taxpayers from investing in property outside the UK and is “not compatible with the free movement of capital”.

Mr Moody said that the cost of the UK allowing extending the Agricultural Property Relief as the Commission suggests would be much less than the disruption that would be caused if the Treasury chose to cut back APR instead.

“Most commercial farmland owned by Britons elsewhere in the EU, whether directly or through companies, will already be protected by Business Property Relief,” he said. “Indeed, the general availability of BPR on business assets may be the practical answer to the Commission’s Single Market concern as it ensures that the location of business investment is not greatly distorted.

“The benefit given by extending APR would be for those houses that would qualify as farmhouses – and then only to the extent of their agricultural value – and situations where the land was predominantly let.”

Mr Moody estimated that just £7m-worth of assets would be involved in any typical year, which if was fully taxable, would equate to a tax value of £3m.

“The practical need for such a relief has been recognised throughout the 115-year history of death taxes and accepting the very limited cost of extending it to the EU is the best option,” he added.

The EC’s proposal is up for a two-month consultation. If no satisfactory decision is reached, it could be referred to the European Court of Justice.