Trusts and Inheritance Tax

Agricultural tenancies

Produced by Tolley
  • 21 Dec 2021 16:32

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Agricultural tenancies
  • The rate of relief
  • Types of tenancies
  • Summary of rates of relief
  • The qualifying ownership period
  • The availability of BPR
  • The availability of APR on the farmhouse
  • Practical planning
  • Change the tenancy to increase the rate of relief
  • Postpone the tenancy until the seven-year rule is satisfied
  • More...

Agricultural tenancies

Land subject to an agricultural tenancy may qualify for agricultural property relief (APR) for the landlord. However, the extent of the relief and the qualifying conditions for tenanted land differ in some respects from land which is farmed ‘in-hand’. ‘In-hand’ farming is the activity of the landowners farming the land themselves. The differences relate to:

  1. the rate of relief

  2. the qualifying ownership period

  3. the availability of business property relief (BPR)

  4. the availability of APR on the farmhouse

The rate of relief

Types of tenancies

Prior to September 1995, farm tenants were granted security of tenure under the Agricultural Holdings Act 1986 (AHA). All AHA tenancies, as a general rule, continue in force from year to year, unless voluntarily surrendered or terminated by a valid notice to quit. Twelve months’ notice is required and the tenant has one month in which to serve a counter-notice. In such circumstances, the issue is adjudicated by the Agricultural Land Tribunal, which in theory, can grant possession to the landlord in the interests of good husbandry, sound estate management, or hardship (though such cases rarely arise). There are certain circumstances in which a tenant loses the right to serve a counter-notice, for example, failure to pay rent, or bankruptcy.

The security of tenure provided to tenants proved to be a disincentive to landowners to let their land. By way of reform, the Agricultural Tenancies Act 1995 (ATA) introduced a new type of tenancy ― the farm business tenancy (FBT). The essential elements of an FBT are that:

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