Comment on tax reliefs
Gillian Gibbons is a solicitor in the Agriculture and Estates team at legal, financial and property specialists Pagan Osborne. She comments on a recent case in relation to Business Property Relief (BPR) on agricultural estates.
An appeal tribunal recently upheld a decision to allow BPR on an agricultural estate where there are a variety of activities and enterprises being undertaken.
Prior to Lord Balfours death, the estate had been transferred to him and then into a partnership established between himself and Mr Brander, his executor and heir.
Mr Brander appealed against a notice of determination issued by HMRC denying BPR in relation to Inheritance Tax was due on part of the estate which included land and properties let to third parties.
This estate is typical of many in Scotland consisting of in-hand farming operations, let farms, let properties, woodlands and sporting rights.
It was upheld that although the income from the letting activities of the estate were substantial, the whole estate had been operated as a single composite business.
As the lettings were deemed to form part of the estates business, it was deemed the letting activities qualified for BPR. If letting activities are carried out independently, they will not usually qualify for BPR which can lead to higher Inheritance Tax bill.
The details of this case are complex and raised interesting issues surrounding the eligibility of property in relation to BPR. It illustrates how invaluable BPR can be to an estate when looking at Inheritance Tax planning.
This case demonstrate the importance of examining business structures and seeking specialist advice to ensure that they are being run as tax efficiently as possible now and for the future.