CGT & IHT Relief for Farmers & Landowners - Managing the Risks

Introduction

The impact of reduced APR and BPR as announced in the October 2024 Budget and followed through in December 2025 with a “semi U-turn” has filled the post-Budget headlines in both the tax and farming press. 6 April 2026 will have passed by the date of this presentation and we will consider the practical impact. The role of the spouse in the succession planning with survival of the surviving spouse relief and the £2.5million transferable allowance. Farming has benefitted from generous IHT and CGT reliefs for a number of decades. Such strong tax reliefs have previously encouraged many investors and ‘lifestylers’ to purchase farms and landed estates resulting in strong farm values. Draft legislation has now been published. The benefit of rollover relief creating ‘rollover buyer’ has been prominent in farm purchases. We will focus on the taxation of farming for the environment and ELMs (Environmental Land Management) subsidies as mentioned in the Spring Budget 2024 and is now the subject of a working group review (we still await the report). We look at CGT and IHT guidance in the gap before full HMRC guidance. The Spring 2024 Budget has confirmed APR on environment projects from 2025 but the Autumn Budget 2024 reduced the future rates of relief subject to the £2.5million allowance with a combined allowance of £5million for husband and wife.

HMRC have blatantly attacked anyone taking advantage of the generous CGT/IHT reliefs particularly with regard to ‘investment’ and ‘landlord’ status s.105(3) IHTA 1984 - tax tribunals and tax advisers have been kept very busy by this approach. One of the most recent cases is Tanner where 5 units of FHA lost the BPR claim. A good deal of farm succession planning is based on the historically strong capital tax reliefs and that can be used to advantage. The changes of the Budget of 30 October 2024 and 23 December 2025 announcement have caused some alarm for succession but there is more positivity with the £2.5million. We consider the Butler case of the wedding barn and loss of BPR through lack of trading. The impact on IHT planning for ill health is considered. We also consider farm diversification being held to be an investment generally and look at radical restructuring, as well as the Kingsworthy Meadow Fisheries case of the need for more services to avoid 0% BPR as there was in the wedding barn case of Butler.

This virtual classroom seminar looks at the certainties and uncertainties of CGT and IHT relief for farmers and landowners, embracing what action can be taken now and tax planning around the risks of uncertainty and maximising the criteria to achieve the relief with focus on the drop of APR/BPR relief to 50% after the £2.5million. A large area of planning involves lifetime gifting but a recent GROB (Gift with Reservation of Benefit) - case Chugtai provides a timely reminder to review GROB risks on farm lifetime transfers as part of the full farm succession planning.

What You Will Learn

This live and interactive session will cover the following:

• Focus on Autumn Budget 2024 (plus spouse amendment in 2025) regarding reduction of APR/BPR to 50% from April 2026 subject to the £2.5million allowance and the transfer to the spouse giving the possibility of £5million - the practicalities
• The impact of small increases in the rates of CGT
• Consideration around the announcements of the working group review on eco system/ELMs and APR was extended for ELMs from 2025 and tax planning whilst results awaited from the working party and risks thereof
• Review of what to do with BPR relief claims on environment projects in the gap before the results of the working group and now
• The importance of CGT/IHT planning before contracts are signed in all areas is essential, especially on new ELMs agreements - the risks of leaving too late
• Funding IHT liabilities - consider hitlist of assets to sell and CGT including the large farmhouse following the introduction of the “mansion tax”
• The increased role of Woodland Relief and Heritage Property revival post drop to 50% APR/BPR after the £2.5million x 2
• The impact of farming for the environment on all IHT and CGT planning and the practical implications on probate and all succession planning
• The importance of the farm partnership agreement and Wills for IHT and CGT protection in the context of all the farming and tax updates and the impact of TRS (Trust Registration Scheme) - the risks of no or weak agreement (see Cobden v Cobden)
• 50% BPR on non-partnership property - now 50% core rate, but 100% relief needed for use of the £2.5million allowance (plus spouse allowance)
• 50% APR on AHA tenancies - now 50% core rate but 100% relief needed for use of the £2.5million allowance (plus spouse allowance)
• Tenancy reform - the impact on IHT and CGT planning
• CGT planning on tenant farmers surrendering tenancy for capital sum
• CGT and IHT planning on farmers selling large and small development areas (Foster case) - with focus around deferred consideration and BPR on hope value with 50% BPR risk - consideration around compulsory purchase orders and loss of hope value on such compulsory purchase
• CGT and IHT protection around permitted development rights option and promotion agreements and the worry of hope value on death
• The general importance of quality valuation throughout
• Farm survival post the APR/BPR reduction and the subsidy gap, the importance of the tax efficient development gains, diversification and succession planning
• Consideration around lifetime gifts of the farm, holdover relief and gifts with reservation of benefit and failed PETs. The need for “meticulous planning” around lifetime gifting - see the case of Chugtai and gifts with reservation of benefit (GROB)
• IHT efficiency of the Contract Farming Agreement (CFA) and all potential farming agreements, e.g. Share Farming and Joint Ventures - the pressure post Rock Review calling the CFA a sham - the risk of weak CFA - must be robust
• The Farm Will and practical probate consideration as part of IHT succession planning and providing for IHT liabilities in Will planning under the Hall case
• The IHT and CGT efficiency of the ‘lifestyle buyer’ - impact of the farm property market - farm values show signs of some weakness
• The relatively new Tanner case with BPR disallowed on 5 holiday units - the need to restructure not just “push the trade over the line”, but possibly “Tanner Farm Hotel” to avoid 0% BPR
• The complications and risks of the role of the spouse in all succession planning with the surviving spouse relief remaining and the transferable spouse £2.5million allowance of 100% relief. Greater involvement of the spouse in all farm succession planning
• Woodland Deferral Relief and Heritage Property Relief - impact
• Some reported drop in value on small farm estates - serious investment opportunities, especially with Rollover Relief
• Impact of the Renters’ Rights Act on purchases plus the cottage - do they “stay or do they go” CGT and IHT implication

Recording of live sessions: Soon after the Learn Live session has taken place you will be able to go back and access the recording - should you wish to revisit the material discussed.