Agricultural property relief – when occupation is sufficient

The First-tier tribunal in the case of Joseph Nicholas Hanson as Trustee of the William Hanson 1957 Settlement (TC01791) has allowed a claim for Agricultural Property Relief (APR) on the basis that a sufficient link between a farmhouse and its associated land or pasture is ‘occupation’ rather than ‘ownership’.

The deceased, Joseph Charles Hanson, was the life tenant of an interest in possession trust which owned his home, a farmhouse – 11 The Green, Great Horwood.  Historically, the farmhouse had been owned together with 800 acres but over the years various parcels of farm land had been transferred such that at the date of death the deceased owned only a limited amount of additional farmland.  In addition, however, there were a further 128 acres which were not owned by the deceased but which were also farmed from the farmhouse.

Section 115(2) IHTA provides that:

“agricultural property” means agricultural land or pasture and includes woodland and any building used in connection with the intensive rearing of livestock or fish if the woodland or building is occupied with agricultural land or pasture and the occupation is ancillary to that of the agricultural land or pasture; and also includes such cottages, farm buildings and farmhouses, together with the land occupied with them, as are of a character appropriate to the property.’

It was accepted by all the parties that if it were correct to have regard to all the land farmed from the house then the requirement of s.115(2) IHTA would be met; however, if the 128 acres could not be taken into account, there would be ‘…insufficient supporting land…’ to bring the farmhouse with the s.115(2) definition.

The case turned on how the provisions of s.115(2) IHTA should be interpreted and technical arguments for and against were considered in detail by the tribunal.  Ultimately – and notwithstanding the earlier contrary decision in the Special Commissioners case of Rosser v IRC [2003] STC (SCD) 311 ­– the tribunal found that

‘…the meaning discernible from the words of the definition in section 115(2) IHTA is that cottages, farm buildings and farmhouses in the third limb of the definition must be of a character appropriate to agricultural land or pasture…in the same occupation, but that it is not required that the cottages, farm buildings and farmhouses should be in the same ownership as the agricultural land or pasture…’

and APR was correspondingly allowed.

The tribunal rejected a separate claim by the appellants that the deceased’s son had acquired an equitable interest in the farmhouse and some interesting issues were discussed in this context.  Given that APR was allowed in any event, the tribunal’s decision on this issue did not have any material impact in the case.

For further information about this case or in relation to inheritance tax or agricultural property relief in general call the Taxdesk on 0845 4900 509 and ask for Ian Maston.