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  • Overview

    We advised the surviving husband (also an executor) in relation to reliefs available following the death of his wife.  His wife had made gifts in her lifetime of shares she had owned in a family company which farmed land owned as beneficial joint tenants by them both.  The deceased also owned separately, in her sole name, other farm land which was being farmed under licence by another person.

    The deceased had died within seven years of making the lifetime gifts of her shares in the family company.  This means the value of the gifts made are still part of the calculation for Inheritance Tax.  However, the family company was a trading entity when the gifts were made and continued to be so at the time of the deceased’s death.  We were able to claim business relief on the value of the gifts.  This meant the lifetime gifts she had made did not reduce the amount of the transferable nil rate band which will be able to be made available to the husband’s estate on his death and so reduce the amount of Inheritance Tax his estate will be liable for.  

    We advised the husband in relation to the land owned by his wife, but which she was no longer farming in hand.  Due to the length of time the deceased had owned the land and because the land had been farmed throughout, albeit not always by her, and that she could attain vacant possession meant that the agricultural value of the land was subject to a claim for agricultural relief.  The land was able to pass into a discretionary trust rather than to the surviving spouse in order to claim the relief now whilst the agricultural relief applied rather than risking the relief being unavailable in the future.

    We also looked at the relief which may be available to the land held jointly with the surviving husband and leased to the family company.  By way of a deed of variation there was potential to alter the way the land was held and so allow the deceased’s share of the land to also pass into the trust, as with the land she owned in her own right.  However, this was less favourable.  The type of lease which the company had over the land meant vacant possession of the land could not be obtained.  

    As the deceased had gifted her shares in the company, she no longer had a controlling shareholding in the company.  However, the surviving husband did have a controlling shareholding in the company.  The surviving husband decided rather than “banking” relief on 50% of the deceased’s share of the farm land he would take ownership of the whole of land.  If the current favourable reliefs for farmland continue to apply on his death and provided he still retains the controlling shareholding in the company then his estate may be able to claim 100% relief on the agricultural value of the land.

    This case study demonstrates the need to look at the assets individually and advise on the options available to the beneficiaries so they can decide what is best for them and their circumstances.

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Jargon Buster