Agricultural estate planning

September 2010

A recent Scottish case HMRC v Brander has raised interesting tax planning possibilities. The area of tax affected is a claim to reduce the value of an estate for inheritance tax purposes by claiming business property relief. Certain qualifying business property is subject to 100% relief so this is a possibility to take seriously.

Consider the following circumstances:

Say a husband operates the farming activities, sports activities etc on the estate while his wife separately runs the letting activities. It is unlikely that the wife will get business property relief against the value of the letting properties. However, if the husband and wife combine their operations into one composite partnership business where the trading activities predominate there is now a far greater chance of a claim for business property relief succeeding against the value of all of the assets comprising the combined estate business.

What this means is that close consideration should be given to the structure of agricultural estates to ensure that they are operated as a single composite business even if it is necessary to draw up separate accounts for reporting purposes.

Unsurprisingly, HMRC are challenging this decision in higher courts so we must await the outcome, this story may not be over.