Agricultural property relief ("APR") is a relief from Inheritance Tax granted under the Inheritance Tax Act 1984.

The relief is available on the agricultural value of agricultural property which is transferred either in lifetime (which would be a gift) or on death. This definition of APR raises several questions.

What is Agricultural Property?

Agricultural property is defined as agricultural land or pasture but also specifically includes:

  • Woodland, so long as it is occupied with and ancillary to the land and pasture;
  • Farm buildings, again, they must be occupied with and ancillary to the land or pasture;
  • Farmhouses and cottages but only if they are of a character appropriate to the land or pasture that is in the same occupation (this is discussed in greater detail below); and

It is important to note that the grazing of land by horses that are not connected with agriculture would render that land non-agricultural.

What is Agricultural Value?

It is important to note at the outset that the agricultural value is not necessarily the market value. The agricultural value is the value of the property if it were subject to a restriction that would mean that it could only be utilised for agricultural purposes. Therefore, in many cases, but by no means all, the open market value will be greater than the agricultural value. This will very much depend upon the location and situation of the land. For example, land on the outskirts of a town will likely have some development "hope value" attached to it, which would be over and above the agricultural value and so would not be covered by APR.

However, it is worth mentioning at this point that in a situation such as the example given above, it may be possible to structure the ownership of the land in such a way that the additional value above the agricultural value qualifies for business property relief (BPR).

What Periods of Ownership or Occupation are Required in Order to Qualify for the APR?

In order to qualify for APR the property must have been:

  • Occupied by the owner for the purposes of agricultural for at least 2 years up to the transfer/death; or
  • Owned for at least 7 years up to the transfer/death and throughout that period have been occupied by another for agricultural purposes.

What Rates of Relief Apply?

The rate of relief will be 100% unless all of the following conditions apply, in which case the rate of relief is limited to 50%:

  • The land is tenanted;
  • The tenancy commenced for 1 September 1995; and
  • The tenancy has at least 24 months remaining at the date of transfer/death.

Farmhouses, Farm Cottages and Farm Buildings

This is an area that has come under particular scrutiny from HM Revenue & Customs (HMRC) and as a result there have been a number of cases focusing on this, which have set out various tests that HMRC will apply when looking at such claims. Generally HMRC will look at:

  1. Whether the building concerned is of character appropriate in size and nature to the land and pasture that are under the same occupation; and
  2. Whether the building concerned is occupied for agricultural purposes.


This is only a brief summary of APR and what is required in order to qualify for the relief. Even within each of the sections there are various caveats, conditions and case law that must be considered in order to satisfy HMRC.

Claims for APR will continue to be heavily scrutinised by HMRC and so it is important that the benefit of APR is not taken as being a certainty, especially at 100% of the market value of the property.

Farmhouses, farm cottages and farm buildings require particular consideration and if there has been some form of diversification on the farm, such as a farm shop, converted buildings, holiday lettings or land utilised for wind turbines or solar panels it is likely that APR will have been lost and so other inheritance tax planning may be required.

It is important that these matters are kept under review and this will often also include considering BPR as a claim for APR is often linked with this. Importantly, of course, although tax will be a consideration when making decisions in respect of the farm and passing it onto the next generation, it is also necessary to ensure that the farm continues to be operated on a commercial basis and that retired farmers and widows/widowers are financially catered for.