Widening the scope of APR
Agricultural Property Relief (APR) is a key inheritance tax (IHT) relief that can reduce the value of agricultural property in an individual’s estate for IHT purposes to nil. However, there are detailed conditions on ownership and use to be satisfied in order to obtain the relief.
Until now the relief has only been available where an individual owned agricultural property in the United Kingdom, the Channel Islands and the Isle of Man. The Finance Act 2009 however, extends the relief to qualifying land anywhere in the European Economic Area (EEA). This comprises all the EU countries plus Norway, Iceland and Liechtenstein.
Going forward this means that an individual owning agricultural land in, for example, France could now qualify for APR on the value of that land in their estate or pick up the relief if they were to transfer the land into a trust in their lifetime and possibly avoid or mitigate their IHT liability accordingly.
The relief has, however, been introduced retrospectively because the UK government has been forced to remove discrimination in favour of UK land. This means that there may now be an opportunity to make a claim for a repayment of tax.
 If IHT was paid on property in the EEA after 23 April 2003 and the land would have met the conditions to qualify for APR then the tax paid can be recovered by making a claim to HMRC. Normally a tax repayment has to be made within six years which would now be impossible for tax paid early in 2003. HMRC are required to allow claims to be made by 21 April 2010 where they would otherwise be out of time.
It is not just IHT which might be repayable. Where a gift of land qualifying for APR is made, that gift can be deferred for capital gains tax (CGT) purposes. If for example an individual had gifted farmland in Eire to their children say in 2005, the parent may have paid CGT on the gain made by reference to the market value of the land at the date of the gift. A claim could now be made to defer the gain until the children dispose of the land and that would give the parent a repayment of CGT now.
Please contact us to review your family’s IHT and CGT position if you consider this may affect you.
Disclaimer - for information of users: This newsletter is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the authors or the firm.
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