Closer scrutiny of APR and BPR

Nick Palmer Cropped

The following article by Nick Palmer was published in the East Anglian Daily Times in April:

For farmers and those who run family businesses, 100% agricultural property relief (APR) and business property relief (BPR) from inheritance tax are central to their tax planning, and the strategy to pass the business to the next generation. Any sign of a reduction in these reliefs would send a cold chill through the farms of Britain.


A National Audit Office (NAO) report has recently revealed that:

  • the value of these reliefs has almost doubled over the last five years (perhaps not too surprising given the upwards trend in land prices); and
  • HMRC does not have measures in place to monitor this, nor the extent to which these reliefs are abused.


There is no doubt that tax reliefs are important and the NAO recognises that. The report states there are 1,128 tax reliefs which serve an ‘essential part of establishing where the tax burden is and is not intended to fall’. Indeed, the Office of Tax Simplification identified 47 reliefs in 2011 which should be abolished; Parliament has subsequently abolished 48 reliefs…but introduced a further 134.


The many reliefs serve different administrative, social and economic purposes. The NAO report recognised the public policy purpose of APR and BPR: to ensure family businesses do not have to be broken up and sold to pay inheritance tax. That has not changed and the NAO appreciates that most people and businesses use tax reliefs as intended. However, any tax relief may be open to abuse and the Public Accounts Committee has responded to the report: ‘Despite good intentions, every one of these reliefs is an opportunity for abuse or fraud.


As one might expect, the NAO wants to audit the extent to which HMRC is able to monitor that a tax relief is achieving its policy objectives and to check that the administration of a tax relief is effective in preventing abuse. The NAO is not examining the merits of any policy objective.


In relation to APR and BPR, the NAO noted that last year measures were introduced to clamp down on some of the means by which these reliefs were exploited by artificial avoidance schemes – for example: loans taken out to buy agricultural land but secured on assets which do not qualify for relief; and contrived debts which were not repaid.


This latest audit should be encouraged so that APR and BPR are reserved, and therefore preserved, for those deserving of the true benefit and purpose of these reliefs.


Nick Palmer is a solicitor at Barker GoteleeSolicitors in Suffolk, specialising in wills, trust and tax issues.

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