Budget could change rules on farming tax relief
Britain’s farmers are set to keep a closer than usual eye on this year’s Budget, a Midland expert is predicting.
Gary Priest, an associate with MFG Solicitors, believes the Government could use it as an opportunity to bring inheritance tax rules involving agricultural property relief into line with the rest of Europe.
The EU has told the Government to sort the situation out and Budget Day on April 22 represents an opportunity.
Mr Priest said: "The current agriculture property relief rules allow relief against IHT on certain land and other agricultural property, provided that ownership and occupation conditions are met. This can and often does extend to cover the farmhouse itself, as well as land owned by a landlord but farmed by a tenant.
"However, the current rules limit the relief to assets that are situated in the UK and it is this restriction that has attracted the attention of the European Commission. The EC has put the Government on notice that it considers this to be ’discriminatory’ as it does not extend the relief to all parts of the EU and European Economic Area (EEA).
"The Government has something of a dilemma. Does it extend a tax relief to cover all of the EU and EAA, with the loss of revenue that that will entail, or does it abolish APR and deprive farmers of this help at a time of great economic discomfort?
"Business property relief, which is not limited to the UK, overlaps to some extent with APR, and would in most cases give relief to owner managed farmland. Crucially, however, BPR does not extend to the farmhouse and the farming community would undoubtedly be worse off than under the current rules.
"We do not yet know how the Government will approach this problem, but some commentators are predicting that we can expect it to be addressed in the Budget."
Others reckon the tax take is minimal and the Government will simply comply, pointing out that British investors in European farms have also always been able to secure relief from inheritance tax by ensuring that those farms are structured as businesses.
But the EC is clear about where it stands.
It stated: "The EC has formally requested the UK to amend its legislation, which provides for discriminatory tax relief.
"The limited scope of the relief may dissuade taxpayers from investing in agricultural and forestry property outside the UK."
The matter could be referred to the European Court of Justice if "no satisfactory response" is made by the UK before the end of this month.
