As solicitors at Blackstone Solicitors, we understand that tenancy agreements can have a significant impact on your eligibility for Agricultural Property Relief (APR). We’re here to help you navigate these complexities and ensure you make the most of the relief available. Let’s delve into the details.
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Understanding Agricultural Property Relief
Agricultural Property Relief is a form of Inheritance Tax (IHT) relief designed to help farmers pass on their agricultural property without incurring a hefty tax bill. This relief can significantly reduce the amount of IHT payable when agricultural property is transferred, either during your lifetime or upon your death.
Types of Tenancy Agreements
There are several types of tenancy agreements that can affect your eligibility for APR. The two most common types are:
- Agricultural Holdings Act (AHA) Tenancies
These tenancies are governed by the Agricultural Holdings Act 1986. AHA tenancies are typically long-term and provide significant security of tenure for tenants. They allow for succession rights, meaning the tenancy can be passed down to future generations under certain conditions
- Farm Business Tenancies (FBTs)
Introduced by the Agricultural Tenancies Act 1995, FBTs are more flexible and can be for any length of time. They do not offer the same level of security as AHA tenancies but are more adaptable to modern farming practices
Impact on APR Eligibility
The type of tenancy agreement you have can affect your eligibility for APR in several ways:
- Ownership and Occupation Requirements
To qualify for APR, the property must meet specific ownership and occupation requirements. The property must have been owned and occupied for agricultural purposes for a minimum period before the transfer:
- Two years if occupied by the owner, their spouse, or a company controlled by them.
- Seven years if occupied by someone else
For tenant farmers, this means that the property must have been used for agricultural purposes throughout the tenancy period. If the property is not actively used for farming, it may not qualify for APR.
- Security of Tenure
AHA tenancies provide greater security of tenure, which can be beneficial for APR eligibility. The long-term nature of these tenancies ensures that the property is continuously used for agricultural purposes, meeting the occupation requirements for APR. However, the introduction of new rules and changes to tenancy agreements can impact this security
- Succession Rights
AHA tenancies allow for succession rights, meaning the tenancy can be passed down to future generations. This can help maintain the continuity of agricultural use and ensure that the property remains eligible for APR. However, the successor must meet specific eligibility and suitability criteria to take over the tenancy
Recent Changes to Tenancy Agreements
Recent changes to tenancy agreements can also impact APR eligibility. Here are some key changes to be aware of:
- New Landlord & Tenant Code of Practice
The new Landlord & Tenant Code of Practice encourages fairness and transparency in tenancy agreements. It promotes the inclusion of a schedule of conditions at the outset of every tenancy and discourages blanket bans on participation in environmental schemes
While the code is voluntary, incorporating its principles into your tenancy agreements can help ensure compliance with best practices.
- Changes to AHA Tenancies
Changes to AHA tenancies include the removal of the Commercial Unit Test, allowing potential successors to occupy another commercial unit of agricultural land. This change aims to modernise the rules surrounding succession and make it easier for the next generation to take over the tenancy
Planning Ahead
Given the impact of tenancy agreements on APR eligibility, it’s important to plan ahead. Here are some steps you might consider:
- Review Your Tenancy Agreements
Ensure your tenancy agreements are up to date and comply with the latest rules and best practices. This might involve incorporating the principles of the new Landlord & Tenant Code of Practice or updating the terms to reflect recent changes to AHA tenancies.
- Seek Professional Advice
Navigating the complexities of tenancy agreements and APR can be challenging. It’s worth getting professional advice to ensure you’re making the best decisions for your situation. At Blackstone Solicitors, we can help you review your tenancy agreements and provide tailored advice to maximise your APR eligibility.
- Consider Succession Planning
If you have an AHA tenancy, consider succession planning to ensure the tenancy can be passed down to the next generation. This involves identifying potential successors and ensuring they meet the eligibility and suitability criteria to take over the tenancy.
Conclusion
Tenancy agreements play a crucial role in determining your eligibility for Agricultural Property Relief. By understanding the impact of different types of tenancies and recent changes to the rules, you can ensure that your property remains eligible for APR and minimise your IHT liabilities.
If you have any questions or need help with your tenancy agreements or APR claims, don’t hesitate to get in touch with us at Blackstone Solicitors. We’re here to support you every step of the way.
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of drafting a Will and setting up a Trust. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Private Client solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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