The confirmation comes after the Central Association of Agricultural Valuers (CAAV) requested clarity on the issue, amid growing interest in tenancy agreements in the province. “Historically, there has been no framework for agricultural tenancies in Northern Ireland,” says Jeremy Moody, Secretary and Adviser to the CAAV.
“With increasing pressures of change for farming families and businesses, there are many occasions when an owner wishes to let another farmer use his land while retaining ownership. Until now, this has been fulfilled via conacre agreements – short-term seasonal access to land – which now account for 30% of Northern Ireland’s farmland.”
However, such short-term agreements are not seen to support good land management, investment and environmental care, and there is growing interest among farmers, landowners and policy makers to adopt longer-term, formal tenancies, he adds. “The CAAV is in discussion with the Government and Department of Agriculture, Environment and Rural Affairs, to help effect this change through the implementation of a Sustainable Land Management Strategy.”
A critical aspect of this work is understanding the tax implications of different tenancy agreements, and Mr Moody has therefore been in consultation with HMRC to provide clarity to the issue. One critical question was whether APR was limited to tenancies under a specific code or simply all tenancies relating to agricultural land.
In response, HMRC’s IHT Policy Division said: “Agricultural Property Relief afforded to qualifying agricultural property let on a tenancy granted on or after 1 September 1995 by section 116(2)(c) of the IHT Act (1984) is not dependent on whether the tenancy is under a code of law, but just has to be tenancy of that property. Such tenancies would include those in Northern Ireland.”
Mr Moody says he is delighted to receive such helpful confirmation of the law. “Landowners and their advisers have been concerned about the risk of any increase in exposure to Inheritance Tax. As Northern Ireland has no specific agricultural tenancy law, some feared that they might lose APR if they let land, however much it might otherwise be the right thing to do.”
HMRC’s statement answers that concern. What matters is that the land qualifies as agricultural property and is let on any form of tenancy that started after 1995. “Moreover, this covers any tenancy of qualifying farmland, however long it is for, while conacre must be used for less than a year to give the same relief,” says Mr Moody. “Neither conacre nor tenancy will give APR on the landowner’s house – the prospective relief on houses to be inherited in the family will often be more effective in that.”
HMRC’s assurance adds powerfully to the case for landowners to look positively at using tenancies to let land to good farmers, rather than stay with conacre, he adds. “That can give a better framework for confidence, investment and improvement, benefiting the rural economy.”
- For more information contact Jeremy Moody on 01452 831815 or email [email protected].