Introduction Background Note
11.Agricultural property relief (APR) is set out at sections 115 to 124C of IHTA. The relief reduces, either entirely or partially, the agricultural value of agricultural property for the purposes of calculating a charge to IHT.
12.Agricultural property includes:
	agricultural land or pasture;
	farmhouses, cottages or buildings that are used for agricultural purposes and are proportionate in size to the nature and size of the farming activity;
	woodland and buildings used for intensive rearing of livestock or fish;
	growing crops transferred with the land;
	stud farms that are breeding and rearing horses, and the land that the horses graze on;
	short rotation coppice – trees that are planted and harvested at least every ten years;
	land that is actively not being farmed to help preserve the countryside and habitat for wild animals and birds under the Habitat Scheme;
	the value of land where the value includes the benefit of a milk quota; and
	some agricultural shares and securities.
13.APR is normally given at a rate of 100 per cent of the agricultural value of land. However property rented out since before 1 September 1995 usually only qualifies for relief at a rate of 50 per cent of the agricultural value.
14.Prior to 22 April 2009, for agricultural property to qualify for APR, it must have been located in the UK, the Channel Islands or the Isle of Man. The extension of APR to property in any EEA state will have effect for all occasions on or after 22 April 2009 chargeable to IHT. This extension will also have effect for earlier chargeable occasions where IHT in respect of the occasion was due or paid on or after 23 April 2003. The amendments ensure that relief will apply in respect of qualifying property located in either the UK, Channel Islands or Isle of Man or in an EEA state when a transfer of value under the terms of IHTA occurs.
15.The existing statutory regime for APR contains certain eligibility conditions for relief; for example, there is a minimum length of time for which the property must be owned. This section extends APR to qualifying property in other EEA states but otherwise leaves APR unchanged. So the existing qualifications for relief will continue to apply to agricultural property on and after the date of extension.
16.Where APR is dependent on terms and restrictions which have meaning in the UK, this section ensures that property in newly included EEA states will only qualify for relief to the extent that equivalent terms and restrictions are applied. For example APR at 100 per cent is dependent on the transferor having vacant possession of the land in question, or the right to obtain it within 12 months of the transferor. This new provision will ensure that the relief will work satisfactorily in other EEA states where a right to obtain something equivalent to vacant possession exists.
17.Extension of APR under this section applies (but is not solely restricted) to relief against any chargeable events associated with settled property (i.e. property placed into a trust). Thus the extension will apply to periodic or exit charges associated with such settlements arising on or after 22 April 2009 and to similar charges arising before that date where the IHT was due or paid on or after 23 April 2003.
18.Extension of agricultural relief under this section also applies (but is not solely restricted) to transfers of value which are, or are treated as being, Potentially Exempt Transfers (PETs) under section 3A of IHTA (provided those PETs result in an IHT being due or paid on or after 23 April 2003 and are in respect of qualifying property).
19.This section also extends the availability of existing relief against IHT for trees or underwood comprised in estates (woodlands relief).
20.Woodlands relief (WR) gives relief, providing an election is made by the person liable for the IHT that would otherwise be due, by excluding the full value of trees or underwood on qualifying land from the calculation of the death estate for IHT purposes. When the timber is sold an IHT liability may then arise on the original beneficiaries.
21.WR could only previously apply in respect of trees or underwood growing on land located in the UK. This section extends the relief to trees or underwood growing on land located in other qualifying EEA states. The amendments restrict the extension of relief to circumstances where the land in question is located in a qualifying EEA state at the time of death. The relief is otherwise left unchanged.
22.Business asset hold-over relief allows deferral of a capital gains tax charge (on a gift or sale at undervalue of a business asset) until the asset is disposed of by the recipient. Claims for hold-over relief are possible in respect of agricultural property that is not farmed by the person claiming the relief.
23.This section will have the effect of extending, from 22 April 2009, hold-over relief to agricultural property in other qualifying EEA states. Other conditions for the relief are unchanged.
24.Hold-over relief in respect of disposals of agricultural property located in a qualifying EEA state in the past will also become eligible for relief. Claims in respect of gifts or sales at undervalue on or after 23 April 2003 will be possible within existing statutory provisions for claims and amended returns. The time limit for claiming hold over relief is five years from 31 January following the tax year to which the claim relates. Claims to relief in respect of the tax year 2003-04 can therefore be made until 31 January 2010.