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Is your farmhouse really a farmhouse?

Gone is the general rule that agricultural land and buildings are exempt from inheritance tax.  Every opportunity to repay public debt is being seized and now farmhouses are in the firing line.
 
Occupiers of farmhouses now have to prove that they still have an active role on the farm.  Retired farmers who reside in the family farmhouse will find that on death their estate will attract inheritance tax at the full market value rather than the lower agricultural value for the property.
 
“Careful planning is required,” said accountant Paul Farrow of Mapus-Smith & Lemmon.  “The last thing any farming family wants is to have to sell the farm to pay the inheritance tax and this latest development could mean just that.  It’s not only about Dad retiring and staying put, it also affects farmers who have made contract farming agreements for others to do the work while they stay on in what is effectively the family home.”
 
The market value of property tends to be higher than the agricultural value and HM Revenue and Customs normally base the agricultural value at 70% of the market value. As a result careful planning should be undertaken to ensure that agricultural valuations are protected.
 
“It is worth taking professional advice to ensure property is indisputably agricultural and therefore exempt from inheritance tax,” said Mr Farrow.  “Another can of worms is capital gains tax which may be payable should the family need to sell assets.”
 

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