APR interaction with BPR

By Tolley in association with Julie Butler
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The following Trusts and Inheritance Tax guidance note by Tolley in association with Julie Butler provides comprehensive and up to date tax information covering:

  • APR interaction with BPR
  • The application of both APR and BPR to farming
  • APR failures
  • BPR failures
  • Failures of both APR and BPR
  • Achieving BPR on a mixed agricultural enterprise
  • Farming partnerships and the interaction of APR and BPR
  • APR and BPR in a farming company

The application of both APR and BPR to farming

Agricultural Property Relief (APR) is available on agricultural property and is restricted to agricultural value. Business Property Relief (BPR) is available on the value of a business. Therefore, both APR and BPR may apply to a farming enterprise. Property which does not qualify for one of the reliefs may be protected by the other.

IHTA 1984, ss 115(3), 105

Where property qualifies for both reliefs, APR takes priority.

IHTA 1984, s 114

BPR is needed to fill the gap when there is a restriction on agricultural value, eg for potential development land as shown by McCall. Certain assets in a farming business are not included within the definition of agricultural property: machinery and livestock for example. Those assets need to have the back-up of eligibility for BPR, if possible. Conversely, APR provides a valuable relief for property which does not qualify for BPR, such as the farmhouse. To gain the best advantage, there is a need to maximise the availability of both BPR and APR on a farming enterprise. With farmland prices having more than doubled since 2005, the quantum of potential inheritance tax (IHT) liabilities has also risen should neither BPR nor APR be available.

McCall (personal representatives of McClean, decd) v Revenue and Customs Comrs [2008] STC (SCD) 752 (subscription sensitive)
APR failures

The following do not qualify for APR but may qualify for BPR:

  • the letting of cottages, other than to farmworkers. See the APR and farmworkers’ cottages guidance note and the ‘Achieving BPR on a mixed agricultural enterprise’ section below.
  • the use of farm buildings for a non-agricultural purpose, eg farm shop, activity centre, workshop
  • the difference between

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