The Inheritance Tax opportunities created by the Tenancy Reform Industry Group (TRIG) are well rehearsed and most estates have considered these opportunities and identified the Inheritance Tax savings available. Carter Jonas are undertaking negotiations with many tenants on behalf of landowners to see if terms can be agreed to replace their existing Agricultural Holdings Act (AHA) tenancy agreements to enable the landowners to capture the increase in Agricultural Property Relief (APR) up to 100%. However, these opportunities don’t just apply to large landed estates. There are many smaller estates and particularly family farms where AHA tenancy agreements are in place between the freehold owner and the family farming partnership where these Inheritance Tax mitigation opportunities are being overlooked.
It is well known that AHA tenants have been wary about any changes to their tenancy agreements that involve adding or subtracting land or changing the terms (other than the rent) because of the technical legal risk of their AHA tenancy agreement being inadvertently surrendered and then re-granted under a Farm Business Tenancy. The Tenancy Reform Industry Group (TRIG) addressed this point so that the land area and terms in the original tenancy can be changed and a new tenancy agreement under the AHA documented provided the original holding continues to form the whole or substantial part of the new holding.
Usually agricultural tenancies that start after 1995 benefit from 100% APR whilst earlier agreements benefit from 50% APR. The changes under TRIG enable landowners of AHA tenancies to negotiate with their tenants to make material changes to the tenancy and create a new AHA agreement starting after 1995 securing an uplift to100% APR. This change can deliver significant financial savings. However, it is interesting to note that some AHA agreements between family members and family farming partnerships in particular are being overlooked potentially missing out on the uplift to 100% APR.
We recommend that landowners of AHA tenancies review their agreements to check what opportunities exist to capture this significant Inheritance Tax saving.