APR interaction with BPR

Produced by Tolley

The following Trusts and Inheritance Tax guidance note Produced by Tolley 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
  • The importance of correct drafting of partnership agreement
  • APR and BPR in a farming company

APR interaction with BPR

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.

Where property qualifies for both reliefs, APR takes priority.

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.

APR failures

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

  1. 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.

  2. the use of farm buildings for a non-agricultural purpose, eg farm shop, activity centre, workshop

  3. the difference between the market value of agricultural property and its agricultural value. See the Agricultural value and development value guidance note.

  4. equine activities that are not the breeding of horses, eg horse liveries, horse racing, eventing. Stud farming qualifies for APR where there is occupation of land.

  5. music concerts, raves, festivals

  6. farming assets which are not land and buildings, eg machinery, livestock, office equipment

  7. market gardening

  8. commercial woodland, including growing

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