Muck spreaders, combine harvesters etc & IHT

Muck spreaders, combine harvesters etc & IHT

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Farmer client wants to know what IHT position is for his plant & machinery etc. on his farm when he dies. He appreciates that all of farmhouse and farm land will be IHT-free but wants to know about the farm equipment. Having read the CTO booklet, it would appear that an "interest in a business" would be 100% exempt, whereas "plant and machinery" would be 50% exempt. Have I understood correctly? If so, why is the "plant & machinery" not an "interest in a business". Where is "interest in a business" defined for IHT purposes. I think that what client has in mind is the ability to pass all assets down a generation tax free.
Any useful comments and tips would be appreciated.

George

George

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By michaelblake
13th Nov 2005 22:20

BPR maybe
APR is due in relation to the agricultural value of agricultural property, if the occupancy conditions at s117 are met. Relief will be due at either 50% or 100% (see s116)

Agricultural property is defined at IHTA s115(2) and cannot include plant and machinery, livestock or deadstock.

The value of these items could however be eligible for BPR at 100% as relevant business property consisting of "an interest in a business" (IHTA s105(1)(a)) Interests in a sole traders business or in a partnership business would qualify under this section. Property held by a partner outside of a partnership but used for the purposes of the partnrships busines would qualify for BPR at 50% only (s105(1)(d))

It is dangerous to assume that the value of a farmhouse and farmland will automaticaly qualify for APR at 100%. See in particular the decisions in Starke, Rosser, Dixon, Antrobus and Williams for what constitutes a farmhouse, and whether if it is a farmhouse the farmhouse might be of a character appropriate to the land occupied with it, for the purposes of s115. Not everything that looks agricultural and smells agricultural qualifies as agricultural property!

The farmhouse in particular may be considered to have a value in excess of agricultural value (see the recent Lands Tribunal decision in Antrobus), and the excess value may not qualify for BPR.

There is extensive guidance on all these points in the HMRC IHManual.If the value of the farmhouse and land are substantial it may be prudent to seek specialist advice.

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By Taxi
10th Nov 2005 12:32

If they are used in the business at the time of death,
then they are in that way no different than normal business plant and machinery.
So if your farmer is a sole trader, he business will presumably flogged off after his death or left to some relative. APR will cover the valuation of his business (including its buildings, land, stock and plant) at death.

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