Commercial Property: Security of Tenure; and Plans for Further APR and BPR Restrictions
Farming families and agricultural land owners - already facing the impending limit on the inheritance tax relief they can claim following death - could face even greater restrictions if new proposals come into force.
Meanwhile the government continues to work through potential changes to the security tenure under the Landlord and Tenant Act and publishes initial findings.
APR and BPR
From next April 2026, farmers and agricultural business owners will only be able to claim, following a death, up to £1m in agricultural property relief (APR) and business property relief (BPR).
There are, however, calls for a delay. The cross-party Environment, Food and Rural Affairs Committee published a report in May urging a one-year delay to the changes so that alternative, less damaging schemes could at least be considered; and to allow more time for farmers to undertake succession planning and take professional advice.
Not only is a delay highly unlikely - but the relief could be restricted further.
The government has recently consulted on further restrictions to the APR and BPR thresholds, which would exclude transfers of assets across different trusts with the aim of maximising the £1m allowance. It means anyone considering transferring agricultural land and business assets in such a way as to maximise tax relief may need to reconsider.
If the proposals go ahead, assets transferred between multiple trusts would be valued collectively for the purposes of IHT, and without a minority discount being available. The consultation document is light on detail so it’s not clear whether, for example transfers between close family members could be excluded (in addition to the usual transferrable IHT reliefs for spouses).
Also, no timescale has been given for final conclusions or draft legislation. Businesses and individuals who are likely to be affected need to start planning for the financial impact of the changes as early as possible.
Security of tenure
A landmark Law Commission consultation on the security of tenure regime under the 1954 was held late last year. The Commission has now published its interim conclusions which will shape the next phase of its work.
Notably, its key provisional view is that the contracting out model which currently exists is the right model of security of tenure. The Commission believes it strikes the best balance between landlords and tenants, saying that several consultee responses voiced concern that a change could cause “unwarranted disruption” to the market.
It also provisionally concluded, in view of the responses, that:
· The existing list of excluded tenancies, which includes agricultural tenancies, should be retained
· The 6-month threshold under which tenancies are excluded should be increased. The Commission says it will consult on increasing the threshold to 2 years
A second consultation will be published, followed by the Commission’s final recommendations. No timescale has been indicated.
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