It is defined as land or pasture used to grow crops or rear animals. Agricultural property can be used for a stud farm or for grazing animals, including ancillary woodland, and can include land that is not currently farmed under the habitat scheme or under a crop rotation scheme. It is important to note that land used to graze horses for riding is not considered agricultural land, but if those horses are used for farm work it does qualify. Farm buildings ancillary to the farm work, farm cottages and farmhouses used for the purposes of farming are also considered agricultural property. However, other agricultural assets do not qualify for APR. These include livestock, harvested crops, farm equipment, machinery, and derelict buildings, along with any property that is in a binding contract for sale. Something to consider with farmhouses is that if they are used to run the farm, they are considered agricultural property. A farmhouse is also deemed agricultural if the person who lives in it works in farming, is a retired farm employee, or is the spouse or civil partner of a deceased employee. On the other hand, if the farm is run from an office, and the house is occupied by someone not intrinsically involved in farming, the farmhouse may be considered residential and not agricultural. If a farmer retires, his farmhouse may then be considered a home for retirement rather than the center for operations of a farming business. If the farm is a family business, it is sensible to get some advice to ensure that this valuable relief is not lost by accident while running the family farming business. Otherwise, upon the retired farmer's death, the land may not be able to qualify for APR. If you own a farm and rent it to a tenant, APR will only be available if agricultural activities are taking place on the farm. If the tenant decides to set up another business, like operating a kennel or raising horses for pleasure riding, the land will no longer be considered to be occupied for the purpose of agriculture. APR will not be available in this case; BPR will not be available either because if it's not the landlord’s business taking place on the land. It can therefore be very important to seek advice when granting a lease and ensuring that there is a formal arrangement in place to restrict the tenant’s activities where APR will be critical to your tax planning. Sometimes, however, BPR will apply to some farmland that doesn't qualify for APR and it may also be available on the balance of value. As mentioned above, APR is a relief against the agricultural value of assets whereas BPR is a relief that will apply against the open market value. Most farms qualifying for APR will also qualify for BPR and the reliefs are often used in combination. Business property can be relieved from tax at 100 percent or 50 percent of its value, depending on the circumstances. The person gifting the land must have held ownership for a minimum of two years, and the business must be a ‘trading business’ (i.e. not consist primarily of making or holding investments). If someone were to invest in properties to let out, these would be excluded as property letting is not a trade for inheritance tax. However, the letting of a small number of surplus properties on a farm would not usually prevent BPR applying albeit it may be excluded from these let properties. Debt must be considered when passing along assets, as well. The 2013 Finance Act contained measures that dramatically changed the way debts connected to APR and BR property are considered. It used to be that a debt was set against the asset on which it was secured, even if it was used to acquire property eligible for APR. Imagine for instance taking a large loan against an asset on which tax may be payable (your let property) and investing in a business or farm such as to receive inheritance tax relief on that asset. This was historically a very effective way of reducing an inheritance tax liability. Currently, any transfer of value on or after 17 July 2013 is treated under new rules, while established borrowing sticks to the old rules. The new rules require debts to be set against APR and BPR assets prior to any relief being given, regardless of the nature of the asset against which the debt is secured. This is something to take into account when making plans around agricultural property. Essentially, APR is a government support for landowners. It is not usually discussed except when a death occurs, and the distribution of assets involves gifting farmland to family members. There is inheritance tax on farmland but, when the property qualifies, APR can offset this amount. It is important to plan for other taxes that will come due at the same time, including Capital Gains Tax. APR and BPR both apply to lifetime gifts so that the act of passing down a farm within 7 years of death will not mean that the relief is unavailable on death. However, care and advice should be sought before relying on this. For about 20 years, non-traditional farmers have been helping to support the land market by buying land, partially because of APR. However, it’s likely that one impact of Brexit will be a reduction on farm income. This is because there are now tariffs on exports and global farmers can potentially sell their products here while enjoying the cheaper production costs in their parts of the world. The result of a reduction of income for farmers may result in larger scale farms taking over the countryside, but if APR stays as it is, landowners may be encouraged to buy more land. Laws surrounding inheritance tax can be complicated and difficult to understand. However, there are reliefs like Agricultural Property Relief and Business Property Relief that must be considered to ensure that they are available where applicable and this can take some advance planning. Consulting with experienced solicitors in order to understand your rights when it comes to the complexity of inheritance law is a good step to take to protect yourself and your heirs from unnecessary taxation.