Naomi Woods

This Practice Note considers the availability of agricultural property relief (APR) from inheritance tax (IHT) in the context of farmhouses. For more general information on APR, see Practice Note: IHT—agricultural property relief. See also the main section within that Practice Note: IHT—agricultural property relief — Farmhouses.As a starting point, the primary legislation one looks to when applying APR to land is contained in sections 115 to 124 of the Inheritance Tax Act 1984 (IHTA 1984). The definition of agricultural land is contained in IHTA 1984, s 115, which specifies it can be property situated anywhere within the United Kingdom that qualifies as agricultural land/pasture, woodland occupied with agricultural or pasture, buildings used in connection with the intensive rearing of livestock or fish, farm cottages, farm buildings and farmhouses. In order for such buildings to qualify as agricultural property, they have to be 'character appropriate to the agricultural land'.However, when it comes to farmhouses, the statutory framework gives little in the way of defining what is and

Succession planning is one of the most important, and often one of the most challenging, issues facing farming families. Farms can often be structured in a complex way, meaning succession planning is rarely straightforward. Land ownership, trading operations and family expectations tend to evolve over generations, resulting in arrangements that can be legally complex and highly personal.Recent developments in agricultural property relief (APR) and business property relief (BPR) from inheritance tax (IHT) mean that traditional approaches to succession are no longer sufficient in a farming context. Therefore, early and thoughtful planning is essential to protect both the farm and the family relationships that sustain the business.Unique challenges of farming successionFarming businesses differ from other commercial enterprises in a fundamental aspect as ownership, control and day-to-day use are often distinct.It is not unusual for land to be owned by parents or grandparents, while the farming business is carried on through a partnership involving the next generation. In some cases, diversified activities, including holiday accommodation