Continued
Navigating the Changing Landscape of Family Farm Tax
IHT bill arising from Budget
Average 2 year EBITDA
Existing Finance and Debt
Cover
Existing finance and debt with IHT
Cover
Farm C
£1,360,000
£150,024
£96,546
1.55
£232,546
0.65
IHT bill arising from Budget
Average 2 year EBITDA
Existing Finance and Debt
Cover
Existing finance and debt with IHT
Cover
Farm D **
£379,393
£26,640
£37,939
0.70
FARM C: Trusts and Family Considerations
FARM D: Succession Planning and Valuation Considerations
Shareholdings can benefit from minority discount in certain circumstances which can be advantageous in reducing value interest in family farming companies.
• Family Structure : Parents (84 and 81), three children (one on farm, two with off- farm careers). • Farm Operations : Combinable crops, sugar beet, 700 acres owned, 350 acres under AHA tenancy, plus four residential lets.
• Family Structure : Parents (75), owning 444 acres let on a perpetual AHA tenancy to family farm company; son owns an additional 306 acres under the same tenancy.
** EBITDA is rent after income tax available to service IHT repayments
Key insights and considerations for family farms These real-life examples show the importance of proactive tax planning in the face of this evolving legislation. But there are many other considerations such as: • Proactive Gifting : Farmers can reduce IHT by gifting land or assets, but it’s essential to plan ahead and use exemptions like the £1 million IHT allowance and CGT holdover relief strategically. • Partnership Agreements : For farms with multiple family members, making sure partnership agreements are aligned with succession goals and tax relief eligibility can make a significant difference. • Pension and Life Insurance : Accessing pensions to replenish income after making gifts, and exploring life insurance to cover potential IHT liabilities, are strategies that need to be factored into a comprehensive tax plan.
Farm Operations : Land rented under tenancy, farm company holds a 49% share.
•
Current Situation :
•
Current Situation :
Bank loan secured for land purchase.
•
Proposed gift of land to son, considering equity between siblings.
Original farmyard has been improved and let as a business park.
Possibility of using a trust to hold land for all siblings and next generation
Gift of the entire landholding to children under PET, subject to seven years; CGT holdover relief claimed.
Residual IHT liability arising from non- core residential property.
Rent income would be forgone, requiring replacement income.
Action Taken :
Action Taken :
Engaged in discussions about how each sibling would benefit from the assets depending on ownership structure. Explored the possibility of a trust to hold land, digesting the consultation document published on 27th February 2025. Most recent residential purchase identified as non-core that could be sold to help cover any residual IHT bill.
Reviewed succession plans, including gifts with reservation of benefit.
Discussed potential valuations for land, tenancies, and shares.
Pension access considered to replace lost income.
Trusts as Tools for Equity and Protection : Trusts offer a way to protect assets and provide for future generations, but they come with complexities that require careful planning and professional advice.
•
Cost & Outcome :
•
Tenancy arrangementsneed to be carefully examined to determine implications on valuation of land subject to the tenancy and the value of the tenant right.
Cost & Outcome :
•
• Succession Plans Should Be Dynamic : Succession planning is not a one-time task but a dynamic process that involves constant review, especially when new legislation comes into play.
Ongoing consultations, with a focus on achieving consensus between siblings before making any significant gifts.
6 | SCRUTTON BLAND | AGRICULTURE AND FARMING
Made with FlippingBook Learn more on our blog