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Utilising Agricultural Property Relief

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12 Days of Christmas - Day 8: Maids a milking

What is Agricultural Property Relief?

Agricultural Property Relief (APR) is a form of tax relief that allows you to claim relief on land that can be used for agricultural purposes, (crops or livestock) and associated buildings such as barns, outbuildings and houses used in connection with the land. 

How does APR work?

To receive APR, the land or buildings must have been owned for at least two years prior to transfer. There is one exception to this rule - if the asset is inherited from a spouse and they too have owned it for less than two years, this scenario is added to that of the late spouse. If the combined period of ownership exceeds two years then APR relief should be available.  If the owner does not occupy the property (land or buildings) which is the case usually with a Farm Business Tenancy) they need to have owned it for seven years in order to qualify for APR. 

What qualifies for Agricultural Property Relief?

Typically, APR is available for: 

  • Land used for crops or livestock 
  • Farmhouses are included as long as they have been used as a base for operations and not just a house.
  • Cottages that have been lived in by someone/family working on the land and are under a tenancy agreement. 

APR is not available for: 

  • Livestock
  • Machinery and farming equipment
  • Harvested crops
  • Derelict buildings/ outbuildings on land 
How much APR is available?

Depending on how the property is owned, relief is due at either 50% or 100%. 

Agricultural Property Relief is a powerful form of tax relief and all options should be explored as it can provide relief of up to 100% after you pass away. If your assets qualify for APR there’s no reason why your maids-a-milking shouldn’t be able to continue to do so following your death. 

As with all areas of taxation, however, Agriculture Property Relief is a complex area and expert advice should be sought on estate planning. 

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Peter has specialised in farms and rural land since doing his articles at Burges Salmon. He has worked in the Midlands for the last 25 years, advising on all aspects of rural property and farm partnerships.

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Utilising Business Property Relief

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12 Days of Christmas - Day 6: Six geese a laying

What is Business Property Relief?

Business Property Relief (BPR) is a form of tax relief that allows you to claim relief on any business assets owned, which can include shares in a qualifying business.

How does BPR work?

If you are a business owner or have an interest in a business, your estate, upon your death, may be entitled to claim relief from Inheritance Tax (IHT).  This form of tax relief reduces the value of a business or business assets in the calculation of any inheritance liability.

To receive BPR, the business or business assets must have been owned for at least two years prior to death. There is one exception to this rule - if the asset is inherited from a spouse and they too have owned it for less than two years this scenario is added to that of your late spouse. If the combined period of ownership exceeds two years, then BPR relief should be available.

What businesses qualify for Business Property Relief?

Typically, BPR is available for:

  • A qualifying trading business or an interest in one
  • Shares in an unlisted qualifying company, including a minority holding
  • Shares in a qualifying AIM listed company

How much BPR is available?

Depending on the type of business, 50% or 100% relief is available.

Business Property Relief is a powerful form of tax relief and all options should be explored as it can provide relief of up to 100% after you pass away. You should ensure your goose that lays the golden egg can continue to do so for the benefit of your family following your death.

As with all areas of taxation, however, Business Property Relief is a complex area and expert advice should be sought on estate planning.

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Ben has a broad range of experience across all areas of commercial litigation, including breach of contract claims, professional negligence recovering large commercial debts, business protection claims and applications for injunctive relief.

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What is inheritance tax?

Quite simply, it is a tax on a person’s assets when they die. It can also be applied to the recipient of a gift that costs over a certain amount and the giver has then died within seven years. The gift does not have to be monetary; it could also be property or possessions.

What’s the limit?

Per tax year, a person is able to give away a cumulative total of £3,000 to whoever they choose. They can also give as many small gifts under £250 to different people as they like.

What’s the seven-year-rule?

The seven-year-rule becomes relevant when a person gives away over £3,000 in one tax year. It states that the giver must survive for seven years after the gift for it to be exempt from inheritance tax. If not, the value of the gift is counted back into their estate when calculating the inheritance tax due. Such gifts will use up the tax-free allowance (nil rate band) available on their death and, if the value exceeds this, the recipient is liable to pay inheritance tax. However, the tax payable does start to taper if it has been more than three years since the date of the gift.

Are there any gifts that are exempt?

Donations to charity and some gifts for marriages or civil partnerships are not liable for inheritance tax, depending on how closely related a person is to the happy couple. All gifts between married couples or those in civil partners are also exempt.

Is there a way to avoid inheritance tax for certain?

Unfortunately, unless a person is psychic, there is no sure-fire way to avoid inheritance tax on gifts over £3,000.

Nevertheless, there is the option of using ‘excess income’. If a person can prove their income meets all their living costs, and that their standard of living can be maintained after the gift, then it may be possible to claim an exemption for inheritance tax. However, to qualify, there must be a regular pattern to this gifting.

All this being said, as long as the giver communicates effectively with the recipient about the potential risks of an expensive gift, generosity does not need to be feared. If in doubt, seek advice from an expert.

Contact Suzanne Leggott on 0116 257 6130 to find out more about how our private client team can help you.

For advice or guidance on any other commercial or legal issues, a member of our team can walk you through everything. Click here to discuss.

Your guide to recovery and resilience

Private wealth, family businesses and family

Your guide to recovery & resilience | Private wealth, family businesses and family

Screenshot 2020-05-27 at 11.18.02

The effects of COVID-19 will undoubtedly have a huge impact on our economy for years to come, with many businesses collapsing under the strain and the level of unemployment set to rise significantly. However, what is less widely reported on is the effect it is having, and will continue to have, on personal wealth. We’ve already seen that the pandemic has led to an increase in people looking at how they may pass on their wealth to the next generation – and even more so for those that own family businesses.

The uncertainty of what’s to come is understandably keeping many people awake at night but, whilst the scope of what our future may look like is still evolving, one aspect that can be controlled is putting measures and provisions in place to plan for the future and protect the wealth of you and your family. As we all try to pick up from where we left off, there are plenty of opportunities out there for effective wealth planning that will make a real difference.

Wills

Review your existing will 
It’s a good idea to regularly review an existing will, particularly if circumstances change such as entering into new relationships, having children or acquiring new assets.

Make a will 
If you don’t already have a will then you should look to put one in place. Begin putting your thoughts down on paper so you can gain a better understanding of your position and the provisions you may wish to make.

Executors of your will 
Decide on who you would wish to appoint as your executives and trustees to administer your will. Choose the right people for the role – you shouldn’t simply appoint people just because they are family and you feel a sense of obligation.

Guardians 
If you have children under the age of 18, consider appointing a guardian who will take over a parental responsibility. Family heirlooms and specified assets - Consider whether you wish to leave specific items of personal belongings, or indeed specific sums of money, to named individuals or charities.

Funeral wishes 
Although not legally binding, if you have a preference for how you wish your funeral to be carried out, and/or have strong wishes in relation to cremation or burial, then you should consider including instructions within your will. Investments – Seek advice about how a change in the investment market, particularly one where asset values are decreasing, could be a good time to make estate planning decisions.

Powers of attorney

Appoint attorneys
Make sure an ordinary power of attorney, and/or lasting powers of attorney in relation to both your finances and your health and welfare, are in place for you and for family members who do not already have them. Ideally, these should be prepared at the same time as preparing a will.

Appoint people you trust
Ensure that the people you trust the most can help you if ever you’re unable to make decisions relating to your property and financial affairs, personal health or welfare.

Specific powers 
Consider whether you wish for your attorneys to have wide-ranging general powers, which would enable them to manage all your property and financial affairs entirely on your behalf, or have more specific and restricted powers to carry out a particular task or transaction.

Tax saving opportunities

Capital gains tax (CGT)
If the value of your assets have decreased then now may be a good time to make gifts of those assets. As an asset value decreases, then so does the impact of CGT. Our blog on protecting your wealth during a period of uncertainty provides advice on how you can make the most of a falling market.

Inheritance tax
Inheritance tax can arise not only on death, but can also be triggered in certain circumstances when lifetime gifts are made. As with CGT, the tax is based on the value at the time the asset is gifted. You should explore opportunities to make lifetime gifts either to individuals, companies or through trust structures, whilst asset values are depressed.

Future changes in taxation
Any abolition or amendment of tax reliefs and measures could result in significantly higher taxes and a reduction in the options available. Therefore, you should act now and plan ahead. Read our thoughts on the types of taxation that could be affected, further down the line.

Donate to a charity
Gifts to registered charities are exempt from inheritance tax, both in your lifetime and on death. Gifts can be made directly or, if you want to be more actively involved, you can set up a charitable trust either during your lifetime or under your will.

Family businesses

Protecting wealth
Now may be a good time to reorganise the share capital of family businesses to create different levels of shares, reorganising them in a way that satisfies all parties in relation to reward and control, whilst potentially mitigating any one or more of inheritance tax, capital gains tax and income tax.

Loss of capacity
Consider making lasting powers of attorney specifically relating to your business role, or reviewing existing ones to ensure that important decisions can still continue to be made should you become incapacitated.

Family matters

Court hearings
If you have a case that has already been listed then check that arrangements have been/are being made to hold this remotely. If you are the applicant then the responsibility for making these arrangements falls to your solicitors. If you do not have solicitor representation yet then the respondent’s solicitors will need to make these arrangements. Our blog on remote court hearings gives an overview of how these work in practice.

Child arrangements
If your child’s time is usually divided between yourself and another parent then that child should continue to see both parents (subject to any restrictions which may override those existing arrangements, such as households having to self-isolate with COVID-19 symptoms). Take a common-sense and co-operative approach to making and adhering to arrangements during this difficult time. However, if you’re unable to reach an agreement with your co-parent, speak to a solicitor to negotiate and settle the arrangements on your behalf, or if that doesn’t work, they can make an application to the Family Court. Watch the recording of our recent webinar on maintaining child arrangements during COVID-19.

Financial settlements
If you’re in the middle of negotiations then it is likely that the disclosure you have already exchanged reflects a much healthier previous financial position. Considerations should be given to existing valuations, and also if there has been a sudden change of income, as this is likely to negatively impact access to capital. Our blog on the impact of coronavirus on financial settlements explains the position where it looks likely that one party may be declared bankrupt in the near future.

Contact us
In response to the pandemic we created our coronavirus hub which includes advice, guidance and insight to help you navigate through these uncertain times. As we all begin to adapt and prepare for the future, our hub will evolve to provide you with further help and resources for surviving, reviving and beginning to thrive in life and business, throughout the challenging times ahead.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

For legal support in relation to the coronavirus or any other matter, get in touch with your team today.

From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business visit SHMA® ON DEMAND.

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We are here to help in your business and personal life - contact us today to find out more.

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Your guide to recovery and resilience

Financial considerations

Your guide to recovery & resilience | Financial considerations

Screenshot 2020-05-27 at 11.17.17

Whether you are a large corporate with a highly structured board, an SME or an owner managed business, the financial viability and success of your business is key to your own future, your family’s future and that of your employees. No business has experienced, or traded through a crisis such as this before, which is being played out on a local, national and international stage.

However, as thoughts turn to the future and what that may look like, businesses that have got through the immediate situation should start making plans and consider a range of measures to enable them to cope with what is likely be a deep recession for some industry sectors of the UK. Prudent business owners will be well aware of the predictions and while there will be a bounce back it is likely to take some time for confidence and stability to return from customers and suppliers.

The main talking point before the coronavirus pandemic was Brexit. This has not gone away and may present further challenges for UK businesses later in the year once the current pandemic is under better management.

Government assistance

If you haven’t done so already, assess your eligibility for government support – you may be eligible for coronavirus financial assistance – in the form of a one of a number of business interruption loans (several different types available), business rates holiday or VAT deferral for example. The package of measures continues to evolve so we recommend reviewing what is available on a regular basis. Some parts of the package of support will be available for longer than others so it’s sensible to keep an eye on closing dates for the various schemes that are available.

Keep up to date

Continue to monitor and review all applicable government grants and economic incentives that may be introduced later this year. Review R&D claims to make sure all eligible costs are identified.

Income tax

On a personal level consider taking advantage of the deferral of the income tax instalment due on 31 July to assist with personal cashflow.

Talk to your lenders

Keep the communication lines open. A lender cannot help with financial support if they are unaware of your situation and do this sooner rather than later while there is still some flexibility in the business.

Review your banking covenants

If you are likely to breach these, be prepared to have an early conversation with a proposed plan.

Business planning should ideally be a continuous process

Now is the time to review your plans, revise your forecasts and draw up new plans and be in a position to implement changes quickly. Adapt your management information in line with this.

Manage all change carefully

Ensure any changes you make now are essential for the future of the business. Introduce internal spending reviews to see where you can make immediate savings, cut costs, and move spending away from non-crucial areas. Now is the time to take stock of savings that can be made as a result of new working practices enforced on businesses by the coronavirus. Some of these may be beneficial and save costs.

Credit terms

These should be revisited and recommunicated to all customers. Strict payment terms should be encouraged as cash is king and will ensure cash flow and working capital for the future.

Check your insurance

Most policies do not cover coronavirus but the government has stated that policies for both pandemics and governmentordered closures should be covered. If unsure talk to your insurer.

Look at the detail

Review your financial control measures and look to make them more robust if required. Review expenses policies, review sign off limits, ensure audit trails are in place.

Communication

Keep talking
Communicate with your key customers and keep them informed of the measures you are taking for your business. If they are in difficulty, be supportive where you can and agree action plans with them.

Be on the front foot
Have upfront conversations with your suppliers. Consider changes to credit terms – being more flexible to support suppliers if possible.

Contact suppliers
Where you may have difficulties in paying, approach with a prepared action plan and be prepared to negotiate. If you have longer term contracts consider whether there is any room for renegotiation of any of the key terms whether immediately or in the coming months.

Internal communication
It’s often appreciated by employees if they are taken along on the journey rather than being kept in the dark. There may well be measures required, such as shorter hours and potential pay cuts in the future, that will become necessary, so having a workforce who understand and appreciate the challenges and the reasons behind any decisions helps any action required.

Opportunities

Bigger picture
Stay abreast of all opportunities that may assist your business – e.g. online activities and be alert to acquisition opportunities and possible investments.

Consider new possibilities
In these difficult times be alert to the possibility of working in new or different/flexible ways to make yourself stand out from the crowd. Consider new avenues to develop new products or services that meet the changing needs of your customers or new areas of demand that have opened up because of the crisis.

Contact us
In response to the pandemic we created our coronavirus hub which includes advice, guidance and insight to help you navigate through these uncertain times. As we all begin to adapt and prepare for the future, our hub will evolve to provide you with further help and resources for surviving, reviving and beginning to thrive in life and business, throughout the challenging times ahead.

Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

For legal support in relation to the coronavirus or any other matter, get in touch with your team today.

From inspirational SHMA Talks to informative webinars, we have lots of educational and entertaining content for life and business visit SHMA® ON DEMAND.

More guides to recovery & resilience

We are here to help in your business and personal life - contact us today to find out more.

Compliance | Health and Safety
Suppliers & supply chain 

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Listen to our SHMA® ON DEMAND content covering a broad range of topics to help support you and your business.

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How can we help?

Our expert lawyers are ready to help you with a wide range of legal services, use the search below or call us on: 0330 024 0333

In order for someone, such as an attorney, to assist, then they must be empowered using a Lasting Power of Attorney (LPA) document which can relate to Property and Financial affairs, Health and Welfare, or both.

It’s not a particularly nice scenario to envisage and plan for but appointing attorneys to help ensures there is continuity in the management of affairs, and the attorneys that have been chosen and entrusted to act, can.

As the average lifespan increases, the chances of people suffering capacity loss increases as well. However, mental incapacity can affect anyone of any age, and it is never too early to plan for it.

When considering preparing LPAs there is often more to think about than you would imagine. We can help people to understand not only the legal implications of appointing attorneys but also the practical implications – those that will affect the management of day to day affairs.

If there is a loss of capacity and there is no LPA in place, it is up to family and friends that wish to assist in managing affairs to embark on making an application to the Court of Protection to be appointed as the person’s Deputy. This can be a lengthy and costly process – one that inevitably places more burden on the appointed Deputy. A Deputyship Order of this nature is not ideal and should not be relied on if possible.

Over the last couple of years, there has been a consultation into increasing these fees and charging a different amount depending on the value of the estate – before Inheritance Tax is deducted.

The higher the value of the estate, the higher the fee.

The plans to introduce this new fee scale have been reignited and it is looking increasingly likely that it will be introduced as soon as parliament has sufficient free time to deal with business other than Brexit.

The amount that needs to be paid may increase substantially if the application for the Grant of Representation is made after the introduction of the new fee scale (seen on the right table).

The Probate Registry is not offering any additional services despite the increase in the fees they will charge.

If a person needs to submit an application for a Grant of Representation then we advise that it is done as soon as possible. Our private capital team can assist in getting clients to the stage of applying for the Grant of Representation quickly whilst ensuring the appropriate Inheritance Tax forms have been completed correctly.

The Non-Contentious Probate (Fees) Order 2018 will come into effect 21 days after the date it is approved by both Houses of Parliament at which point the new fees will be applied.