Farmers reaching retirement age are being advised to undertake a valuation of their property and put in place suitable plans that will allow them to live on in the farmhouse while the land is let on a Farm Business Tenancy (FBT) agreement.
It is believed that changes to the nil band IHT rate applying to farm houses being left to lineal descendants will open up more opportunities for new entrants into the agriculture sector via FBTs.
That’s the view of the rural team at Bruton Knowles who believe the changes that come into effect in April 2017 will not only make it easier for farmers to keep the properties while the land is leased to those wanting to earn their living through an FBT.
It will come about because from April 2017 an inheritance tax Main Residence Nil Rate Band (MRNRB) will be introduced to allow residential property that has been an individual’s home to be passed free of IHT to direct descendants.
The new levels will, according to Roger Bush at Bruton Knowles, bring more properties within the nil IHT band and offer married couples with lineal descendants a more direct and less problematic relief than having to show that the dwelling house is a farmhouse.
It will therefore making the process of passing on property between families a much simpler process while agreements on working the land can be reached through FBT.
Roger is now advising that an up-to-date valuation would be a prudent course of action to take before deciding on retirement plans.
Roger said: “The introduction of the new rules is less than a year away so taking action now could be worth considering. We’ve undertaken a number of valuations on behalf of clients and looked at what occupation arrangements the owners could enter into.
“Our advice is to look ahead and get a plan in place. With an IHT rate of 40 per cent the savings could be substantial.
“The new rules will probably see more families keeping the house while looking for suitable arrangements to maintain the land as a working farm.
“This is good news for new entrants looking for a way in to the sector so we’re likely to see a rise in the number of FBT agreements in the future.
“We’ve been undertaking appraisals on farm house values to facilitate tax planning in time for April 2017 and our advice to anyone who falls into this bracket is to act now.”