In John Carlisle Allen v HMRC [2016] TC05100, the First Tier Tribunal (FTT) decided that grazing land qualified as a business asset as the taxpayer occupied and farmed the land
Mr Allen owned about 10 acres of land which was let to a neighbour for seasonal grazing and silage from March to November each year.
He:
- Supplied free fertilizer to be used when needed; the neighbour was not allowed to apply his own fertilizer.
- Supplied water to the land all year round.
- Engaged a contractor to cut hedges and weeds annually.
- Arranged and paid for fences to be inspected and maintained.
- Kept some animals grazing in the winter, taking care not to put too many animals on the land to avoid it becoming trampled, muddy and wet.
- Used the land for lairage every few weeks of the year, including when it was being used by the neighbour.
HMRC denied Mr Allen’s claim for Capital Gains Tax (CGT) Business Asset Taper relief on the grounds that:
- The neighbour occupied and farmed the land.
- Mr Allen was not carrying out sufficient acts of husbandry to be classed as farming.
The FTT found that:
- Mr Allen was in occupation of the land for the whole year.
- Mr Allen was occupying the land wholly or mainly for the purposes of husbandry by
- Keeping the land in a good state of condition and fertility.
- Carrying out necessary work of maintenance and repair.
- Mr Allen had an awareness of the land, its condition and the need to repair it, which went beyond that of a property investor.
Mr Allen’s appeal was allowed.
Comment
Although this case relates to the now defunct Business Asset Taper Relief and conacre agreements in Northern Ireland, it is relevant for Entrepreneurs’ Relief and may be of assistance in terms of IHT Business Property Relief or Agricultural Property Relief and for grazing agreements in the rest of the UK, providing more detail and certainty as to what the owner of land must do to qualify for such tax reliefs.
Case reference: John Carlisle Allen v HMRC [2016] UKFTT TC05100
