Purchase of a Landed Estate

Mr Arnold is a farmer based in Gloucestershire. He was buying a landed estate and needed advice to ensure that he qualified for the available reliefs from inheritance tax.

Problem

• Mr Arnold instructed us in relation to the purchase of a landed estate in Gloucestershire. The estate included a farmhouse, 1000 acres of arable farming and a small number of holiday cottage letting properties.

• Mr Arnold wished to structure his newly acquired agricultural and business assets in a tax efficient manner. Although it was thought that the farmland and farmhouse ought to have qualified for agricultural property relief (APR) (assuming proper farming), the let holiday cottages would not have qualified for either APR or business relief (BR) in their own right.

Solution

• We created a partnership to give the farming and letting activities on the estate a formal structure.
• The farmland and holiday letting cottages were purchased through the newly created partnership.
• The farmhouse was left outside the partnership and acquired by Mr Arnold in his own name.

Benefit

• By structuring the farmland and let properties though a partnership that principally carried on the activity of farming the intention was to ensure that Mr Arnold’s interest in the partnership qualified for BR. The inclusion of the holiday letting cottages in the partnership effectively meant that BR had been extended to assets that would not otherwise qualify for relief.

• Three years after we set up the partnership structure, Mr Arnold obtained planning permission for a commercial development on the edge of his estate. The development value associated with this land is relievable under the umbrella of BR (which it would not have been under a APR claim).

• By holding the farmhouse outside the partnership structure, Mr Arnold had peace of mind that his farmhouse was protected from third party claims arising from the farming or holiday cottage letting activities. APR is still available on the farmhouse provided the partnership (of which Mr Arnold was a partner) continues to farm the surrounding farmland.