Business Property Relief (BPR) and Agricultural Property Relief (APR) are reliefs that can significantly reduce or offset an Inheritance Tax liability. In previous blogs (see Related Articles below) we have discussed BPR and the issues involved in determining whether this relief is available. This blog will instead focus on APR and the definition of "agricultural purposes". What is APR? APR is available on certain transfers of property. The property can be transferred either as a gift during the individual’s lifetime or on their death. In order for the relief to apply, the following conditions must be met: 1) The property must be agricultural property. This is defined as agricultural land or pasture which is situated in the...

In our previous blog Taxpayer Clears Hurdles for BPR on Livery Business (12 September 2018), we discussed the First-Tier Tribunal (“FTT”) case of The PRs of the Estate of Maureen W.Vigne (Dec’d) v HMRC. In this case, the courts found that the services provided to horse owners (such as providing horses with hay which was grown on the land and removing horse manure from fields, daily health checks of each horse, worming, etc.), in addition to the provision of land for grazing and stabling purposes, were sufficient for Business Property Relief (“BPR”) to be available. Consequently, this allowed part of the estate to benefit from 100% relief from inheritance tax. However, an appeal against this decision was made by HMRC to the U...

As announced in Budget 2018, the government has revived controversial plans to increase probate fees in England and Wales that were scrapped before the 2017 General Election. What is Probate Probate (or more accurately a "grant of representation") is the process by which a deceased’s personal representatives get recognition from UK courts that they are legally entitled to deal with a person’s assets and liabilities (collectively known as their “estate”) after they have died. Probate isn’t always required. For example, estates that are small enough or contain simple assets like cash can sometimes be managed without probate. However, personal representatives for larger, more complex estates or those with land or foreign ...

In a departure from recent cases regarding holiday lets, the First-Tier Tribunal (FTT) has ruled that a holiday let in the Isles of Scilly is eligible for business property relief (BPR) for inheritance tax (IHT). Those looking to claim BPR on their own holiday lets may find this case instructive but should bear in mind that HMRC are likely to challenge claims until clearer precedents are set by higher tribunals or courts. Background Grace Graham and her husband purchased a dilapidated farmhouse within an acre of land in St Mary’s on the Isles of Scilly in 1972. The farmhouse was renovated and extended before being used as B&B and then country house hotel up to 2003. From 2003, the business changed in response to incre...

Trusts and complex estates with tax liabilities or reportable events in 2016/17 are normally required to notify HMRC of this by 5 October 2017. HMRC have now announced that as part of the introduction of the new online Trusts and Estates Register, this deadline has been extended to before 5 December 2017. Trusts and Estates Register The new online register for trusts and complex estates is being introduced as part of the EU’s Fourth Anti-Money Laundering Directive. The new register is designed to streamline the process by which trustees and personal representatives notify HMRC about their trust/estate.  Previously this process was done by paper.  The new service is also aimed at making it easier for details to be updated re...

The decision previously announced by the government to change probate fee charges has now been scrapped. The reason behind this appears to be the snap general election, with the notice from Newcastle District Probate Registry, stating: 'There is not enough time for the Statutory Instrument which would introduce the new fee structure to complete its passage through Parliament before it is dissolved ahead of the general election. This is now a matter for the next Government.' The draft regulations had proposed a new charging structure which would have seen vast increases in the amount payable by larger estates. The changes had been criticised as they were felt to be unfair, unpractical and more akin to a tax than a fee, therefore the scra...

HMRC has quietly made a major change that will allow personal representatives to deal with the tax affairs of estates more simply in future. Normally when a person dies, the personal representatives of the deceased will need to settle any tax liabilities. If the deceased was already registered for self assessment, this could mean filing at least two tax returns in the tax year of death: one for the period from 6 April up to the date of death and one for the period of administration. In practice HMRC will allow personal representatives to informally settle the tax liabilities for the period of administration where: Total income tax and capital gains tax is no more than £10,000; The estate was worth no more than £2,500,000 on de...

From 6 April 2016, the Personal Savings Allowance (PSA) was introduced to enable basic rate taxpayers to receive up to £1,000 of savings interest tax free. Higher rate taxpayers will be able to receive up £500 tax free. As a result of this, banks, building societies, and National Savings and Investments (NS&I) will no longer deduct 20% tax  on interest paid to account holders as most taxpayers will not be liable to tax on this income. The PSA is available to individuals only, therefore trustees and personal representatives who previously did not complete a tax return or made informal payments to HMRC may incur new reporting burdens. In light of this, HMRC have announced interim arrangements regarding trustee returns, returns f...

The death of an individual can understandably be a difficult time, however tax obligations, such as the requirement to file tax returns and pay the tax due on behalf of the deceased, do not cease upon death. The tax liabilities can be split into two parts: the deceased’s tax affairs up to the date of death; and the period of administration (i.e. the period following death up until the date that estate is distributed). Part 1: Tax affairs up to the date of death On the death of an individual, it is the personal representatives’ responsibility to file a tax return disclosing all income received by the deceased taxpayer from 6 April up to the date of death. Income Tax Income tax will be charged as normal on all taxable inco...

As announced in the Summer Budget 2015, from 6 April 2016 the rules to how dividends are taxed will be changed for individuals, trusts, and estates. Please click here to read our article on how the changes will affect individuals. The effect of these changes is that many trusts and estates will face a significantly higher income tax bill going forwards. Estates Under the current rules, dividend income arising on an estate after the date of death is taxed at the effective rate of 0%. However, under the new rules the 10% tax credit and associated grossing up of the dividend will be abolished and all dividend income will be taxed at a rate 7.5%. Trusts Trusts are entitled to a £1,000 standard rate band, and all income received w...