The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Agricultural Property Relief is limited to the agricultural value of agricultural property. The market value of the property may exceed the agricultural value.
The definition of agricultural property as given by the legislation is explained in more detail in the HMRC Inheritance tax manual at IHTM24030 and subsequent pages. Agricultural property is:
agricultural land or pasture (IHTM24031)
woodland (IHTM24032) and any building used in connection with the intensive rearing of livestock or fish (IHTM24033) if the woodland or building is occupied with agricultural land or pasture, and the occupation is ancillary to that of the agricultural land or pasture
cottages (IHTM24034), farm buildings (IHTM24035) and farmhouses (IHTM24036) together with the land occupied with them, as are of a character appropriate (IHTM24050) to the agricultural land or pasture
IHTA 1984, s 115(3)
Agricultural value is defined as, ‘The value which would be the value of the property if the property was subject to a perpetual covenant prohibiting its use otherwise than as agricultural property.’ In other words, it excludes any part of the value attributable to its potential for alternative use.
Development (hope) value is the difference between market value and agricultural value. It may be possible to sell agricultural land on the open market for a sum in excess of its agricultural value because of its development potential.
For inheritance tax purposes, assets are valued at market value ― the price that would be achieved between willing buyer and willing seller. An example of the stark difference which can arise between agricultural value and market value is the case of McCall where the agricultural value was £165,000 and the market value was £5.8 million. When determining the market value, it can be argued that not many lenders would be prepared to lend monies to purchase speculative blocks of potential development land as they can be difficult to resell, thus, pushing development land values down. Nevertheless, the price at which land can be
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