Inheritance tax for farms: You get a decade to come up with the money... but may face paying interest
A lawyer has described the imposition of inheritance tax on farmers as the biggest such change “probably in about 40 years”, saying that the ramifications will be “huge”.
Julie Ann Osborne also set out some more details of how it is expected the new rules will play out – including that farmers may have to pay interest on the tax they owe.
She is a partner at CMG Cunningham Dickey Solicitors, with branches in Belfast, Bangor, and Newtownards; the firm specialises in tax and legal affairs of farming estates.
She said that inheritance tax “is payable within six months of death otherwise interest accrues… if the estate consists of property/land you can opt to pay the tax over a 10-year period in 10 equal instalments, but interest applies”.
Currently that interest rate is 4% per year – meaning “a significant additional cost if chosen to pay over the 10-year period”.
Some had suggested that a farmer transferring the farm to their children before death would be a way around the tax.
But the children could still be liable to pay the 20% inheritance tax if the parent dies within seven years of that transfer taking place.
Ms Osborne said the current regime of farm tax began in around 1986, and that in the last 40 years “many non-farmers have taken advantage of buying land to avail of the generous tax reliefs, which has perhaps influenced the government’s current thinking on removing this”.
She added: “There will be lots of planning needed for farmers and it may encourage generational transfers of farms – but that can have an effect on the capital gains tax, so there are many taxes to consider.”