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Agricultural Property Relief explained

By Saskia Arthur

Agricultural Property Relief explained

Saskia Arthur from Boodle Hatfield explains the complicated rules governing the inheritance tax APR

The rules for Agricultural Property Relief (APR) are complicated and subject not only to ownership and occupation conditions but also a time condition. APR is essentially available for transfers of value of 'agricultural property'. This includes land, houses or other buildings occupied wholly or mainly for the purposes of activities normally recognisable as farming such as the growing of crops or the raising of farm livestock (but excluding activities such as market gardening).
 
In order to obtain this relief, a landowner could seek to impose an covenant on the land that it must only be used for such an agricultural purpose in order to try and qualify for APR. However, landowners need to be careful because positive covenants to do something on land do not bind future owners of a property unless arrangements are put in place so that covenants are then taken from each and every future owner of the land. A covenant needs to be restrictive in nature to bind future owners and some care will be required in drafting any such covenant to ensure that it will bind a future owner of the property.
 
Landowners would also need to give some thought to the effects of trying to impose such a binding obligation, as it could depress the market value of the property. In practice therefore it is probably rare for such a covenant to be imposed purely to try and qualify for APR.

Contact: Boodle Hartfield (020 7079 8197)

Look out in next week's issue of Country Life magazine which explains the risks of buying a house with agricultural ties (out May 5, 2010)

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