With the reduction of Agricultural Property Relief (APR) and Business Property Relief (BPR) to £1m per person, assets that were previously of less relevance such as livestock and deadstock, development or hope value and tenancy valuations are now a crucial part of the valuation process.
In my previous blog posts, I reviewed how the valuation of livestock and deadstock will be a crucial part of valuing a farm business going forwards as well as how development land or land with ‘hope value’ will be treated. In this blog, I will cover how the value of tenancies is considered.
The value of tenancies is often overlooked as they are considered to be of no value. Agricultural Holdings Act tenancies, however, often provide significant periods of security and a lower rent formula meaning that even if they cannot be easily transferred there is a value in having the tenancy compared to not having it. How these values are assessed is complicated and can be approached in different ways based on the type and terms of the agreement.
In addition, there may be tenant’s improvements such as buildings or fixed equipment paid for by the tenant that should be valued with the tenancy.
Tenancies can also be useful from a landlord’s perspective as they typically reduce value, based on the fact that the landlord is unable to gain vacant possession. The value of this requires an analysis of the value of the rent that is received and the future reversion to vacant possession.
As I have mentioned before, making the best of the change to IHT will probably require the input of several professionals, with a land agent, tax advisor and solicitor working collaboratively. However, the starting point for mitigating the impact on a business is still an informed valuation.
Contact us to day to book your ‘Asset review and valuation’ and get clear advice on how to proceed.