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that's 400k I need to find
£400k split over ten years interest free though which makes it a bit more manageable.
Also worth noting generally that there are other exemptions for passing on family businesses (not farms) and this is bringing farming into line with them. You can be left a construction business worth £1m and won't pay tax on that.
aggi
Very valid question :)
It's because if forced to sell assets to cover an IHT bill, the working farm could become non-viable.
To give you an example, let's say I inherit a 500 acre arable farm with a farmhouse on it, several barns and grain sheds, a couple of tractors, a manitou, and a combine harvester. Let's say it's worth 5 million.
If I've got to pay IHT on everything over 3 million at 20%, that's 400k I need to find. Maybe I could sell the combine harvester for that, but then I wouldn't be able to crop my wheat without paying a contractor who owns their own combine harvester. I can't sell the tractor or the grain sheds because without them I can't do any arable farming. So I realise that I'm going to have to sell 40 acres of fields to cover the bill.
So I do what I need to do and sell those fields to another farmer or landowner. Now I've only got 460 acres of fields on which to grow my crops, at which point it may well no longer be a financially viable farm. If that's the case, I'm forced to sell the farm, which is now not a viable business to farm. This is how we remove a working farm from the economy.
Best case scenario it is bought by a landowner who rents it to a tenant farmer who finds a way to make it viable. Most likely scenario, however, is that other parts of the farm become unfarmed. Let's say the farmhouse and 10 acres are sold to a multimillionaire. The rest is sold to existing local landowners who rent it out to other farmers or smallholders.
To me that feels very different to something like a construction company because the difference between assets and profit isn't so cavernous. If the heir to the construction company has to sell some of their tools, vans, and storage space to cover the IHT bill it isn't such a big deal. The business could still be viable on a smaller scale.