You should prepare a will to set out who you would like to benefit from your assets (including your farm) on your death. It is important to think about who you would like to benefit from your assets and what the tax implications might be. Inheritance Tax needs to be considered on death, where a liability arises this can be detrimental to businesses, particularly farms with high capital asset values where there may not be cash available to fund the liability. To help mitigate the inheritance tax due there are two important Inheritance Tax reliefs which can apply to farms where certain conditions are met.
It is important to review the whole farming enterprise and your personal financial position to identify where Inheritance Tax reliefs are available. Agricultural Property Relief can provide relief against Inheritance Tax at 50% or 100% of the agricultural value of an asset. Where farms are heavily diversified or have non-agricultural value, e.g. hope value for land development, Business Property Relief can provide relief at either 50% or 100% of the value of an asset.
Once your current position has been established consideration can be given over whether you can improve the inheritance tax reliefs available to you and if you should consider planning giving assets away in your lifetime.
Few people can talk about their deaths comfortably with their family and loved-ones but it is essential to have open and honest discussions so that everyone is aware of your wishes. This is particularly important where you have multiple children, some that are involved in the farming business and some that aren’t.
The rules surrounding Inheritance Tax and the reliefs available are complex and so it is.
