Farmers and Farm buildings are always problematic, so it was interesting to see that this case would at the First Tier tribunal, and it shows that common sense does prevail! HMRC may yet take this further, but it stands for the time being.
Basically, a farmer, who had farmed all his life, was denied Agricultural Property Relief “APR” on the farmhouse when he died, as HMRC argued that the farming activities were so reduced that he was no longer farming.
The FTT disagreed, as he took account of the length of time he had been a farmer, and his age.
If you find yourself in a similar position and need advice, please get in touch.
The full case is here:
APR for IHT: elderly farmer occupied farmhouse for agricultural purposes despite scaling down of farming activities over time (First-tier Tribunal)
The First-tier Tribunal has decided that an elderly farmer occupied a farmhouse for the purposes of agriculture so that its value was eligible for agricultural property relief (APR) on his death.
HMRC issued a notice of determination on the basis that the house occupied by the deceased was not a farmhouse so that it did not constitute agricultural property within section 115(2) of the Inheritance Tax Act 1984 (IHTA 1984). HMRC also maintained that the house was not occupied by the deceased for the purposes of agriculture in the last two years of his life as required by section 117(a) of the IHTA 1984. Towards the end of his life the deceased’s activities were scaled down to such an extent that he was no longer farming the land attached to the property. Latterly, he had allowed third parties to graze livestock on the land in exchange for rent and his role had been reduced largely to carrying out maintenance tasks rather than farming.
The tribunal (Judge Jennifer Dean and Mr David Moore) decided in favour of the taxpayer. It took into account the historical background to the farming business so that the deceased’s activities over a longer period of time could be considered. This led them to conclude that the deceased’s vocation had always been farming. His occupation had been and remained that of farming even though his role had diminished and altered due to his age and infirmity. The purpose of the farmer’s occupation of the farmhouse did not, therefore, change. He had always been a farmer and although the manner in which he farmed was modified with time and age, his activities did not cease to be for the purposes of agriculture nor did they become those of an investor, hobbyist or retiree.
Although cases on agricultural property relief are always decided on the specific facts, this decision will be helpful to professional advisers with elderly farming clients. The tribunal judges endorsed the sentiments voiced in Golding v HMRC [2011] UKFTT 351 (TC) that a farmer does not cease to be a farmer or cease to be in occupation of the farmhouse for agricultural purposes if he gets old or sick.
Case: Charnley and another v HMRC [2019] UKFTT 0650 (TC) (28 October 2019)
(Judge Jennifer Dean and Mr David Moore)
