Many of the concerns raised about the introduction of an active farmer test for people who are leaving farmland in a will have been taken care of in the Finance Bill which was published on Thursday 10 October.

Most importantly, the Bill allows for a transitionary period for the introduction of the six-year active farmer test, which will commence on 1 January 2025. Between that date and the end of December 2030, the “six-year period” will be counted only from 1 January 2025.

This means that farmers currently have time to get their active farmer provisions in place, and do not have to worry about what they have done over the past six years.

However, the Bill states that the active farmer test requires that the person passing the land on either has to be actively farming the land themselves, or has to have a lease in place on the farm.

Lease agreements

This would imply that many arrangements where farms are being worked by sons or daughters, or where there is a company involved, will have to make sure they have proper lease agreements in place come 1 January.

The Bill also allows for a change in the active farmer test for those inheriting the farm to allow those farmers to lease some of the farm, rather that be required to farm at least 75% of it themselves.

The Bill completely gets rid of the previous inheritance allowance where relief could be claimed on a non-farmland inheritance where that inheritance is made subject to the condition that it is invested in agricultural property within a two-year period.

Farmhouses

It is unclear from the Bill how farmhouses would be treated under conditions where a farm is fully leased, and it seems that discretionary trusts would not qualify for relief.

Marty Murphy, head of tax at ifac said: “This is a significant change in the tax rules around gifts and inheritance for agricultural land, and we still have concerns over the effects they will have on succession planning.”