Tax loophole closure of the week: “Lifestyle farmers” face a tax clampdown
Buying a farm to escape inheritance tax (IHT) has long been a popular ruse, says the FT. Unfortunately, a recent court win forHM Revenue and Customs renders this option a little less enticing.
Buying a farm to escape inheritance tax (IHT) has long been a popular ruse, says the FT. Unfortunately, a recent court win forHM Revenue and Customs renders this option a little less enticing.
Land Tribunal judges decided in a test case that farmers' inheritance-tax relief will "only cover the agricultural value of a farmhouse and not its market value, which is usually far higher, meaning 40% tax is levied on the difference".
Mark Balfour, partner at accountants Larking Gowen, says the Revenue has been pushing for a clampdown and this case "could give it the backing it has been looking for".
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Currently, IHT relief on agricultural land and property is available to anyone who buys a farm, provided certain conditions are met. The Land Tribunal decision made it clear that although land and farm buildings will still be eligible for IHT relief, the farmhouse itself should only qualify if the owner or their spouse farms the land on a "day-to-day basis", or used to before retiring.
Lifestyle farmers, those who leave the day-to-day running to a contract farmer, and those who have scaled down their agricultural activity, will all be affected.
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Emily has worked as a journalist for more than thirty years and was formerly Assistant Editor of MoneyWeek, which she helped launch in 2000. Prior to this, she was Deputy Features Editor of The Times and a Commissioning Editor for The Independent on Sunday and The Daily Telegraph. She has written for most of the national newspapers including The Times, the Daily and Sunday Telegraph, The Evening Standard and The Daily Mail, She interviewed celebrities weekly for The Sunday Telegraph and wrote a regular column for The Evening Standard. As Political Editor of MoneyWeek, Emily has covered subjects from Brexit to the Gaza war.
Aside from her writing, Emily trained as Nutritional Therapist following her son's diagnosis with Type 1 diabetes in 2011 and now works as a practitioner for Nature Doc, offering one-to-one consultations and running workshops in Oxfordshire.
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