It appears that a number of landlords are asking tenants with a tenancy agreement under the Agricultural Holdings Act 1986, to sign anew agreement in order to take advantage of larger Inheritance Tax reliefs.
Tenanted farm assets with a tenancy under the Agricultural Tenancy Act 1995 attract 100% IHT relief whereas tenancies under AHA 1986 only attract 50% relief. The logic from a landlord’s perspective is clear: the tenant has nothing to lose and the landlord has potentially a lot to gain, by the surrender of an old tenancy and the grant of a new one.
The key benefit of a tenancy under the AHA 1986 is lifetime security of tenure which was not retained under the ATA 1995. However, a change in the law in 2006 means that, in certain circumstances, a tenancy granted under an ATA 1995 can retain the protection afforded by the AHA 1986. Therefore if you are approached about a surrender and re-grant of your tenancy, here are a few tips to bear in mind:
- Make sure you do not surrender any of your rights under the new tenancy.
- Check that you will not be liable for any capital gains tax as a result of any benefit arising from the change.
- Check that your succession rights are not compromised.
- Ensure that any improvements you make are carried forward.
- Check that the new tenancy will be, as a minimum, as beneficial for you as for the landlord.
Our advice is to make sure that you don’t end up any worse off, for instance giving up a lifetime tenancy for a farm business tenancy. If in doubt, do contact us for advice.