Do working farmers need to worry about Inheritance Tax?

Working farmers generally feel that they don't need to worry about Inheritance Tax on their farms as Agricultural Property Relief (APR) gives 100% relief from Inheritance Tax for agricultural land. 

This is not necessarily true.

The agricultural value is the value a property would fetch on the open market if it could be used only for agriculture.  An attractive farmhouse with spacious grounds would have considerable appeal as a desirable residence.  The value eligible for APR is the value as a farmhouse to a working farmer.  The additional value the house may have, as a desirable residence, is liable for Inheritance Tax. 

The same principle is now being applied to genuine agricultural land used entirely for farming.  The agricultural value of the land qualifies for APR, but any surplus market value does not.  This could arise if the land is a possible candidate for planning permission or has what the Revenue refer to as "amenity value". 

It is possible in some circumstances to claim Business Property Relief in respect of the surplus market value, depending on the exact use of the land.

The conclusion to be drawn is that it is no longer safe to assume that if you are a working farmer your farm will escape Inheritance Tax on your death.  It may well be possible to arrange your affairs so that no tax is paid, but you must get good quality advice at an early stage.  Putting it off could burden those who inherit from you with an unexpected tax liability.