Preparation is Key Ahead of APR Changes

Many column inches have been given over to the caps to the Inheritance tax (IHT) reliefs for Agricultural Property Relief (APR) and Business Property Relief (BPR) announced in the Autumn Statement. Whatever your feelings about the changes, for those impacted, it requires a change in approach.

Inheritance Tax (IHT) and the associated reliefs are at the forefront when taking advice on estate planning, when dealing with an Estate after death and when considering a Trust.The starting point for any conversation around these subjects is gaining a clear picture of assets – what they are, their value and how they are used. It is equally as important to know what you want to happen with those assets, but that conversation is for another article.

For a variety of reasons, the need for valuations around business assets is well established. The shift in mentality applies more significantly to agricultural assets. When an asset would benefit from 100% relief with no question, its actual value was of limited importance. Formal valuations may not have felt like money well spent, but the introduction of the caps gives cause to pause on that thought.

Why does it matter?

Estate planning based on guesstimates leaves a lot of room for error, reducing the value of advice and planning steps taken.
As an extension of the above point, accurate valuations are required for precision planning to maximise the availability of a variety of reliefs can significantly alter the overall position.
Once a land agent is involved and has a good working knowledge of a farm, further valuations are more straightforward.
Identification of other reliefs that may be available, such as Woodland Relief or Heritage Property, to mitigate against the caps on APR and BPR.
As the importance of valuations increases, we can expect a greater number of challenges and negotiations from HMRC. A robust valuation at the outset can mitigate delays and arguments, increasing the chances of securing a swift, more positive response.
Aside from mitigating IHT, the ability to bring an enquiry to a swift conclusion should not be overlooked. Uncertainty is never good for business and the ongoing management of a farm will be compromised by protracted negotiations with HMRC.
As Farmer’s see their profit margins squeezed, a good land agent can do much more than provide valuations. They can help see possibilities for diversification, the roles key family members can play and so much more, drawing on their local knowledge and understanding of the industry.

If you take one piece of advice from this article, it is to get good quality, tandem advice from a Private Client Lawyer and a Land Agent, who will work in concert to maximise and retain the value of your Estate.

If you have any questions or concerns, please contact Katherine Webber ([javascript protected email address]) for further information.

The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.

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