IHT bill arising from Budget
Average 2 year EBITDA
Existing Finance and Debt
Cover
Existing finance and debt with IHT
Cover
Farm A
£406,274
£99,690
£38,447
2.59
£79,074
1.26
IHT bill arising from Budget
Average 2 year EBITDA
Existing Finance and Debt
Cover
Existing finance and debt with IHT
Cover
Farm B
£548,800
£123,489
£57,233
2.16
£112,113
1.10
FARM A: Strategic Gifts and Pension Adjustments
Action Taken:
Current Situation :
•
•
Reviewed the profit allocation and revised the partnership agreement.
290 acres, farmhouse, and buildings owned by parents.
Family Structure : Father (77), son, and daughter-in-law in partnership.
•
Admitted the wife into the partnership to use her £1 million exemption.
Existing bank debt secured on the son’s property interest.
• Farm Operations : Combinable crops and small pig enterprise, spanning 370 acres.
Pension access used to replenish reduced profit following the gift of land.
Gift of land to son, retaining house, buildings, and some land; partner capital also gifted to son.
Current Situation :
•
Cost & Outcome:
No bank debt, but a hire purchase agreement for a tractor.
•
PET subject to seven years; CGT holdover relief claimed.
Professional fees (comprising Land Agent, Accountant and Solicitor) of delivering the services: £12-15k. The strategy reduces the IHT liability by over £400k but requires the qualifying periods for exemption to be met.
Gift of land to the son, with a Potentially Exempt Transfer (PET) subject to seven years; CGT holdover relief claimed. Wife (76) admitted to the partnership with a joint share in the land and farmhouse. Two-year qualifying period for wife to be eligible for APR and BPR exemptions.
Gift inter vivos planned, along with a decreasing term life insurance policy.
Action Taken :
•
Reviewed profit allocation, equalised partner capital between parents and son.
FARM B: Gift with Holdover and Life Insurance Planning
• Family Structure : Parents (84 and 82), son in partnership.
Explored life insurance to mitigate the risk of not surviving the seven years.
• Farm Operations : Combinable crops and sugar beet on 430 acres.
Cost & Outcome :
•
The strategy helps reduce IHT liability, though the family is weighing up the costs of life insurance policies.
A more tax-efficient transfer of assets over time.
AGRICULTURE AND FARMING | SCRUTTON BLAND | 5
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