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Inheritance tax and wind farms

A deep-dive into the intricacies and practicalities of working out the inheritance tax of a wind farm.

One of the advisory group members was asked to prepare the inheritance tax return for a long-standing client last year. An onerous undertaking at the best of times but this client owned a substantial area of forest and had leased a proportion of this for a wind farm several years previously. Their first thought was that no inheritance tax reliefs could be claimed for the land on which the wind farm stood but they then turned to look at the evidence.

First the valuation report. At first glance this suggested that less than 50% of the land was used for the forest and the value of forest was less than 50% of the total value – yes, you’ve got it, they were considering if a claim could be made along the lines of Balfour. A more detailed review of the valuation report threw doubt on the valuer’s interpretation of the land usage. The initial valuation report covered a total area of 425 acres of which 180 acres were described as commercial crop area and 90 as the area for the wind farm. This raised a number of questions: