Inheritance Tax – Agricultural Property Relief

Over recent years HMRC have challenged claims for Agricultural Property Relief particularly where the farming activity has been scaled down over the years, often as the farmer gets older and whilst there is nothing that requires the farming operation to be profitable there must still be some farming activity to support the claim. Where there is a true farming enterprise involving the growing of crops and all rearing of stock a claim based on entitlement to the single farm payment where the farmer has sold all his equipment and machinery will probably now fail.

Farmhouses create their own problems because they are often well situated in a secluded area and can command a high charm premium. There are far fewer working farms than in previous generations and much greater use is now made of farming contractors. There must be some recognisable farming activity and the farming activity must relate to the farmhouse. Often the sale of land adjoining the farmhouse will be fatal to the successful claim for relief.

A recent case also held that the farmhouse must be of a character appropriate to the farmland. The owners of grand country houses will find the Revenue examining closely agricultural use of the farmhouse, the farm buildings and the land and lifestyle farmers will find it increasingly more difficult to pursue a successful claim.