Stay in control to get tax relief on farm

Posted by LindaStenner on November 27, 2019

Stay in control to get tax relief on farm

November 27, 2019 at 2:41 PM

Farming estates and farmers looking to reduce the burden of Inheritance Tax on agricultural property can take heart from a recent tribunal which ruled in favour of a deceased farmer over HMRC.

In the case Charnley and another v HMRC [2019], which went to the First Tier Tribunal in July, a farmer (deceased) succeeded in getting Agricultural Property Relief (APR) and Business Property Relief (BPR) on grazing land which he licensed out and his farmhouse. 

The farmer in the case, who died in 2013, in his later years allowed other farmers to graze much of his land under annual grazing licences. After his death his estate claimed APR and BPR but the relief was refused by HMRC over the house, barn and buildings.

Commenting on the case, Eifion Bibby, a land agent with Davis Meade Property Consultants, said that whilst HMRC may appeal  the significant fact for the Taxpayer was the level of active husbandry undertaken in respect of  the land, the grass and others’ livestock allowed on under grazing licences to maintain his  “working farmer status “ in the years prior to death .

 “He spent a lot of time tending the land and the grazier's cattle, inspecting them at least once a day, more when necessary, very actively managing grass, boundaries, water etc and making silage for which he had a good range of machinery, much of it old but apparently very serviceable,” explained Eifion.

“This meant that the estate could show that the farmer was in control of the land even though he let it out.”

Charles Cowap, a rural tax specialist and visiting professor at Harper Adams University, said that the issue of actual APR should not be a problem in this case as this relief is available on agricultural land no matter whom is doing the actual work provided it has been owned long enough. 

The real challenge is for BPR on any excess of market value over agricultural value, and for APR on the farmhouse itself.

Since the deceased was considered an active farmer managing the farm from his home, it followed that the farmhouse should qualify for relief. The buildings were used for housing stock and machinery so could also be included for APR and BPR.

The key is that the more farmers can prove that they do a genuine job of managing the grass crop the better their chances of claiming tax relief on death.

 “It is important that farmers keep a careful record of all the work they do on their farm even though their land is licensed out,” said Eifion.

“HMRC seemed to make something of the fact that the farmer did this work voluntarily so it may be worth considering setting up a stock supervision agreement as part of, or alongside, a grazing licence in the future.”

For more details go to http://www.bailii.org/uk/cases/UKFTT/TC/2019/TC07425.html  or for advice contact Eifion Bibby at DMPC on 01492 510360, email eifionbibby@dmpcuk.com

Note to editors.  Although the hearing was back in July the decision was not issued until October 28. 

eifion-bibby-mrics-faav.jpg

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