APR and Foreign Properties – Spring Budget Changes

Jul 18, 2023

Since 2009, UK farmers who own land abroad have been able to claim Agricultural Property Relief (APR) in the form of inheritance tax relief for lifetime transfers of that land, or on death.  

This is a result of a Finance Act 2009 amendment of the Inheritance Tax Act 1984 (IHT 1984) which extended APR to the European Economic Area (EEA).  

It came about because the European Commission felt that IHT 1984 was not compatible with the free movement of capital as set out in the Maastricht Treaty. Despite coming into effect on April 22, 2009, it applied to IHT due or paid on or after April 23, 2003. 

However, the eagled eyed amongst you might have spotted that in this year’s Spring Budget, the government announced it is seeking to reverse this legislation.  

If you didn’t, don’t worry, it hardly attracted much in the way of headlines. But for those UK farmers who do own land abroad, it could have far-reaching consequences.  

What Changes Are Due?  

The change is coming about in the wake of Brexit. Although Britain opted out of much of the Maastricht Treaty, the government of the day did amend IHT 1984 due to the Commission’s stance. Now, having left the EU and with the promise to further tax revenues from those holding land abroad, this particular tax break is destined for the scrap heap.  

The change will take effect from April 6, 2024, and will mean that all land and property located in the EEA, the Channel Islands, and the Isle of Man, will be treated the same as any other land or property held outside the UK, which means APR will no longer apply.  

What Can UK Farmers Do?  

Unfortunately, with the decision made to remove the tax relief and a relatively short window in which to plan, there are not many options for UK farmers who own land or property overseas. One solution might be to consider a lifetime transfer of the land or property before the new rules come into play, or of course, decisions about divesting of overseas assets might want to be considered. This creates its own tax challenges, however.  

Ian Parker, director of Whitley Stimpson and agricultural tax specialist, encourage farmers with overseas assets to start planning for the change as soon as possible.  

Ian said:

“This change in regulations is likely to impact a relatively small number of UK farmers, but those that it does affect could end up considerately out of pocket. Our advice is to work with your accountant to find the most tax efficient solution for your business.” 

For more information on the changes, contact Ian Parker on (01295) 270200 or email ianp@whitleystimpson.co.uk. 

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