13 Feb 2020

A Tribunal rules that though age and infirmity had restricted his activities, for tax purposes a farmer was still engaged in farming at the time of his death.

When an elderly farmer passed away, HMRC decided the farmhouse he was occupying at the time was not agricultural property for the purposes of Inheritance Tax, because he had considerably scaled down his farming activities.

Does grazing count?

In HMRC’s view, the farmhouse was not eligible for Agricultural Property Relief (APR) since for the last two years of his life, the farmer was no longer farming the land attached to the property, but had rented it out for livestock grazing and was simply maintaining it.

The First-tier Tribunal saw the case differently and ruled in favour of the farmer’s estate. Thanks in part to witness statements from those grazing the land, and the farmer’s own records, it was clear that despite his age and infirmity the farmer was still repairing fences, controlling weeds and carrying out other maintenance work.

Still genuinely farming

Although HMRC contended that grazing was not agricultural work, the First-tier Tribunal ruled that it was a continuation of the deceased farmer’s lifetime activities. He had always been a farmer and continued to be, albeit having to adapt to his increasing years and frailty. The Tribunal therefore ruled that APR was appropriate in this case.

Recent test cases have shown HMRC is loath to consider grazing as an agricultural activity, where APR on farmhouses and farm buildings is concerned. Having proof that ‘proper’ agriculture was carried out, as in this case, could potentially save a substantial amount of Inheritance Tax. It certainly pays to keep accurate records of life on the farm.

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