HMRC has updated its guidance notes on what constitutes agricultural use of land for Inheritance Tax (IHT) extending its definition of ‘food’, according to UK accountancy firm BKL.
This means that for the first time there’s an opportunity for the owners of commercial vineyards and orchards to shelter their IHT liabilities.
Richard Crane, head of the farms & estates team at BKL, believes that this could be a “significant extension to tax planning opportunities as it will become widely known that land used for producing wine and cider is eligible for Agricultural Property Relief (APR).”
This is even more likely as the relief is not limited to land within the UK but extends to the European Economic Area (EEA), and therefore could boost the sector for investors seeking to reduce their IHT liabilities, together with the joy of owning a vineyard.
“Before the publication of this extension, it was widely believed that HMRC restricted its definition of food production to what the ‘average consumer’ would recognise as food,” Mr Crane explained.
It has long been established that owner-operators of wine producing vineyards and cider-producing orchard businesses have been able to claim Business Property Relief (BPR) as part of their IHT planning.
However, “what is now more apparent is that the passive ownership of wine-producing and cider-producing land which is let to third party wine and cider producers is also an effective IHT shelter for the owner. This may encourage new investors to enter this sector,” he concluded.
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