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Preparing probate valuations: what you should know

Mon 3 June 2019

Andrew Lawes, Head of Stags Professional Services in Cornwall, outlines key issues when preparing probate valuations.

As I watch grass keep agreements being drafted, I am reminded of the potential risks of such arrangements when planning for Inheritance Tax, specifically Agricultural Property Relief (APR).  

A requirement for the application of APR is that the property is occupied for the purpose of agriculture and occupation is different to ownership. Where land is let under a grazing licence the owner is unlikely to be in occupation of that land for agricultural purposes during the period of the licence and this may have an impact on whether APR is available on the farmhouse. Furthermore, where there are extensive farm buildings, it may be that not all of these are occupied for agricultural purposes. Similarly, where the farmhouse is occupied by a retired farmer who has let the qualifying farmland to a tenant under a Farm Business Tenancy (FBT), the farmhouse may not be deemed to be occupied.

Problems can also arise when traditional buildings – no longer viable for modern farming methods – are deemed suitable for development. When an owner is absent due to ill-health, but the farmhouse is still fulfilling an important role, it is still possible that the house remains the centre of farming operations during this time. 

APR is only available on the agricultural value of the property, but the open market value of the farm could exceed this, perhaps because the land has planning permissions or holds development or amenity value. Furthermore, attractive farmhouses may appeal to non-farming purchasers and will therefore have a market value above their agricultural value. 

Finally, outstanding mortgages or other secured liabilities on the property need to be deducted before calculating the APR.

It is vital that you use your assets prudently and plan for succession. For bespoke advice about your individual circumstance, contact Stags Professional Services today. 
 

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