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IHT Planning – Stud Farms IHTA84 / S115 (4)

At present stud farms should qualify for Agricultural Property Relief for Inheritance Tax Purposes. To qualify for relief the Property in question must satisfy the following:

1. It must be Agricultural Property as described by the IHTA 1984 S115(2).

2. Occupied for the purpose of farming which includes thoroughbred horses, using the land for grazing and the owner is responsible for the upkeep of the land.

Agricultural Property includes UK land and buildings providing the buildings are appropriate to the land. Historically is has included cottages and farmhouses but HM Revenue and Customs reviews this treatment on a case-by-case basis.

The difficulty is that no definition exists within the Act of what constitutes as a stud farm. There has to be an element of horse breeding and the normal requirement of commerciality will need to apply. No relief will be given for a hobby, which is not carried on for gain.

Let Properties – Stud Farms

Owners of stud farms, which are being let, should also qualify for the 100% relief providing one of the following applies:

1. The property is let on an agricultural tenancy beginning on or after the 1 September 1995 Farm Business Tenancy.

2. The owner has the right to vacant possession within 12 months. However the owner can apply for an Extra-Statutory Concession extending this period to 24 months for land under tenancy.

3. If the owner is beneficially entitled to the interest in the land since March 1981, and made a transfer of value before that date, it would have attracted full relief under ‘working farmer’ rules. However the owner must not have had the right to vacant possession within 12 months.

To obtain more information or for more detailed planning please contact the PEM Tax Department on 01223 728222.