Landowners letting land with potential development value may face unexpected inheritance tax bills following a recent tax case. Rob Hitch, of Dodd & Co, considers the implications of the case on local landowners.
The case, released in April, may now give landowners concerns where land has been let out on a grazing licence for many years particularly if there is hope or development value on the land in question. In the case in question, McCall & Others v Revenue & Commissioners, the issue at stake was whether land owned by the deceased was relevant business property for the purposes of Inheritance Tax.
The case concerned land let out on short term grazing agreements by the owner. The land in question, only 33 acres, had been zoned for planning and had a market value of £5.8 million, compared with an agricultural value of £165,000.
At stake was whether or not Business Property Relief (BPR) would be available for inheritance tax, which would have given relief for the full value of the property. The Commissioners ultimately decided in the Revenue's favour, resulting in a tax bill of over £2 million.
The issue was the involvement of the owner in running the business and the tasks they carried out. To ensure that BPR will be available landowners should examine carefully their letting arrangements where there is some potential development value. This is particularly relevant now as local councils examine their future housing strategy.
Many people hang on to small areas of land around villages and towns in the hope of getting development. In order to preserve BPR on these assets owners need to ensure that they do not fall in to the traps that will deny the relief.
For further details, please contact Rob Hitch. |
