FARMERS usually want to leave their working farm businesses to family members who work in the business, often making sure that the remainder of their estates pass to perhaps their spouse or other children, who do not work in the family business.

Most farm land will qualify for the 100 per cent Agricultural Property Relief (APR) and wills usually ensure that assets qualifying for APR pass to the family member who is continuing farming.

In the past, the subsidies were attached to the business so would go to the new owner. The reform of the Common Agricultural Policy, which brought in the Single Payment (SP) scheme, has changed how this "subsidy" is treated for inheritance tax and, indeed, for capital gains tax (CGT).

The SP does not qualify for APR, so if your will specifies that only APR qualifying assets are to go to the continuing farmer, and any residue of your estate is to go either to your spouse or to non-farming children, then the SP will pass to the latter and not the farming member of your family. One would be left with the situation where the Single Payment could go to a beneficiary who owns no qualifying land, and therefore the claim would be lost. Single Payment does qualify for Business Property Relief if the owner is also a working farmer and has held the SP for more than two years. Those farmers need to ensure that the business and the Single Payment pass to the continuing farmer.

Many landowners qualify for Agricultural Property Relief only because they have owned their land for more than seven years and the land is used for agriculture (even if not farmed by the landowner). Such landowners will not usually qualify for Business Property Relief for the SP so again they need to ensure this asset follows the gift of the land to preserve the future SP claims.

SP is a marketable commodity despite the woeful delays in payments. Present rates can be up to 1.8 times last year's payment. As such, it is an asset for capital gains tax purposes and is deemed to be acquired at January 1 last year and at nil cost. There could be a capital gains downside. But if the farmer qualifies for business asset taper relief for the farming business, and assuming he sells after January, then the SP will also qualify for this relief giving a CGT rate of ten per cent. Holdover and rollover relief is also available if the business being sold or transferred would also qualify.

Those landowners who would not qualify for business asset taper relief, because they hold their land as an investment, need to be aware that the market value of the SP will also be charged to CGT on a sale or transfer.

Farmers and landowners need to check their wills to ensure the assets do follow the land holding to protect Single Payment claims.

* Val Hutchinson is an Inheritance Tax consultant with Blackett Hart & Pratt. For information, contact her on 0191-221-0898.