In William Charnley & Maxwell Hodgkinson as Executors of the Estate of Thomas Gill (deceased) v HMRC [2019] TC7425 the First Tier Tribunal allowed claims to APR and BPR. It was a working farm so the house was a farmhouse and the business was not an investment business.
Agricultural Property Relief (APR) applies to the agricultural value of agricultural property:
- Occupied by the owner for the purposes of agriculture for two years ending with the date of the transfer.
- The owner has vacant possession of the property or a right to vacant possession within 12 months or
- he has owned the property for seven years and it has been occupied throughout for the purposes of agriculture whether by him or another.
APR covers farmhouses, as long as they are of a character appropriate to the property.
Business Property Relief (BPR) applies on the transfer of relevant business property. There is no BPR if the business is one of "wholly or mainly" in the making or holding of investments.
Mr Gill died owning Woodlands Farm which comprised:
- The house in which he lived.
- A yard, brick barn and outbuildings used to store tractors, JCB’s, balers and other farming equipment as well as housing sick animals.
- 21.19 acres of bare agricultural land (permanent pasture).
- A range of buildings and yard let for the storage of commercial grass cutting equipment.
He owned a further residential property which was let. He claimed the single farm payment.
- Mr Gill did not own any livestock. He allowed farmers to graze their livestock on his agricultural land under annual grazing licences.
- He had day-to-day involvement in checking the livestock and in the husbandry and maintenance of the land. He grew vegetables on an acre of land and sold/exchanged them in the local shop.
- Mr Gill’s executors claimed APR and BPR. No relief was claimed for the let buildings and yard.
- APR was refused on his house, the brick barn and all other outbuildings but allowed on the agricultural land.
- The entire BPR claimed was refused. There was a business, but it was investment in land meaning the property was not relevant business property.
The FTT allowed the appeal. The farmhouse and other buildings were occupied for the purposes of agriculture and the business was that of farming and not wholly or mainly of the holding of investments.
- The activities carried out by Mr Gill were those of a farmer, working an active farm. They were not done to let the land or prepare the land to let or to improve it so as to increase income, which would be more akin to the activities of an investor or a business in the letting of land.
- The use of an acre for to grow vegetables for sale/exchange was much more than a vegetable patch kept by a hobbyist gardener.
- He was not a landowner holding an investment in respect of which he carried out incidental work. An intelligent businessman would view the asset as a farming business being turned to account by the day-to-day farming carried out by Mr Gill with the additional component of some investment income being received.
Comment:
HMRC dealt with each piece of property in isolation to determine whether it was used for agricultural purposes. The tribunal also looked at the whole property “in the round” taking a wide interpretation of “for the purposes of agriculture” and listening carefully to the witness accounts of the tenants under the grazing licences who were both very credible.
Links to our guides:
IHT Business Property Relief (subscriber guide)
IHT Agricultural Property Relief
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