Client wishes to make provisions to pass farmland / agricultural buildings to his son.
Is this an easier process to do during his lifetime rather than have it left to him?
ie. 100% agricultural relief takes care of IHT, holdover relief applied to any capital gain now when both parties are able to sign up to it.
Any advantages / disadvantages either way?
Also, if everything was signed over bar the farmer's private residence could this lead to any potential problems down the line?
Replies (7)
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Issues
By delaying the gift until death there will be no need to hold over the gain. It will be wiped out.
If father is to retain the farmhouse and give everything else away, it is likely that APR will be lost on it. If he retained the farm, perhaps with the son in partnership, the prospects of APR on the farmhouse would be greatly improved.
From the son's perspective, the bird in the hand principle applies. Could he be sure of inheriting the land on death?
TCGA 1992 s62
No claim is required. Assets are inherited at probate value but, if APR was due on death, the value of the land will not be "ascertained". Therefore HMRC will not agree the valuation at the time but only when there is a disposal which may be many years hence.
Also
Remeber, if father passes away within seven years of making the gift and son happens to have sold the land, APR would be lost when the value falls back into father's estate.
Non-tax related but is son in a stable place financially and matrimonially? Would hate to see the land lost to debtors or ex-spouse-to-be.
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You're confused.
There is no CGT on assets held at death. Only IHT.
The only way of avoiding IHT on the farmhouse would be for the father to retain the house until death and for the house to qualify as being owned and occupied by a farmer until that point in time. If so, the asset would escape IHT and CGT.
If a gift of the farmhouse and land is made now it is possible that gift relief can be claimed to eliminate the father's cgt. However the gift will be ineffective for IHT purposes unless he moves out or pays a rent.
Farming
The father will need to continue to farm to claim APR. There was a tax case on this issue a few years ago when the taxpayer lost having passed over the farm but retained the farmhouse even though the farmhouse was still used to run the business. Of course he does not have to do any of the actual work. His son can do it. Either he could employ his son or they could be in partnership.