UK Inheritance Tax - Agricultural Property and Woodlands Relief

A timely reminder from Partner, Jade O’Kane: UK inheritance tax agricultural property relief and woodlands relief will be limited to UK land from 2024

As part of the UK Spring 2023 Budget, the British Government announced that the scope of Agricultural Property Relief (APR) and woodlands relief will be restricted to agricultural property in the United Kingdom. At present, the relief also extends to land in the Channel Islands, Isle of Man and the European Economic Area; for individuals with agricultural property or woodlands in these areas, thought should be given as to whether interests could be structured to secure Business Property Relief (BPR) instead.  There are currently no indications that the geographical scope of BPR will be likewise restricted.

The geographical scope of APR and woodlands relief was extended by the Finance Act 2009 to agricultural property and woodlands within the European Economic Area (EEA) following a decision of the European Court of Justice that the original scope of an equivalent German tax relief was a restriction on the free movement of capital and contrary to EU law. This was followed up with a formal request from the European Commission for the UK to widen the scope of the relief.

The reversal of this extension is not unexpected following Brexit, so it is not surprising that this change to target IHT reliefs at assets situated in the UK is being made and seems intended to encourage investment in UK land rather than overseas.

Following this change, property located in the EEA, the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK.

This measure will be introduced in Finance Bill 2024 and take effect from 6 April 2024.

Jade O’Kane advises clients in both Irish and Northern Irish property and inheritance law.