Farmer wins inheritance tax fight

Inheritance Tax

When I’ve spoken about farmland and agricultural property relief in the past, I’ve always advised the same thing, in order to qualify. The owner of the farm must remain within the farmhouse and ensure that the land continues to be farmed either by themselves, a member of the family or an employed farm manager or farmhand.

What we haven’t considered however, is what happens in the unlikely event when the property and the land are owned by different people.

Unlikely it is, but this was the case recently with a farmer, who took HMRC to several tribunals, to contest the removal of APR on a farmhouse which his family had owned for over 100 years.

HMRC’s position was that by interpreting the initial principles of inheritance tax, it was essential that to apply for relief, both the land and property must be owned by the same individual.

After appealing to both the First-Tier and Upper Tax Tribunals, the farmer’s adviser revealed that the Inheritance Tax Act 1984 used the word “property” rather than “estate” and that HMRC’s interpretation had been incorrect.

Happily, the court concurred that the farmhouse was “of a character appropriate to the land” and awarded the man his APR, no doubt leading to many future appeals of a similar nature.

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