Skip to content

Structuring the ownership and occupation of agricultural property

Carefully structuring the ownership and occupation of agricultural property and any changes to arrangements has been underscored by some recent tax cases, say Fiona Graham and Will Hadley. 

As the summer sun baked the countryside the Upper Tax Tribunal delivered its long-awaited decision on inheritance tax on farmhouses where the farmland and farmhouse are not in common ownership.

The Upper Tax Tribunal has confirmed that in order for a farmhouse to be of a "character appropriate" to the associated farmland for the purposes of obtaining agricultural property relief ('APR') from inheritance tax, common occupation of the farmhouse and farmland is a sufficient connection.

In Hanson v HMRC the question was: do you measure the character of the farmhouse against agricultural property in the same ownership as the farmhouse or in the same occupation? In that case, the farmhouse and around 25 acres of farmland were owned by Mr Hanson (the deceased) for IHT purposes, but the house was occupied by his son who farmed the land together with 128 acres of his own land.

It was agreed that, for the farmhouse to qualify for APR, the 128 acres of farmland owned by the son needed to be taken into account. HMRC argued that the 128 acres should be disregarded because they were not in the same ownership as the farmhouse. The UT disagreed and confirmed that the son's common occupation of the farmhouse and the 128 acres of farmland was sufficient nexus for the farmhouse to qualify as agricultural property in the deceased's estate.

The decision provides a useful insight into the interpretation of the legislation and represents a step away from previous decisions which looked towards common ownership. The decision itself contains practical examples of how the legislation applies, which are a helpful reference for considering APR on farmhouses where the ownership structure is not straightforward, as is often the case.

However, the UT warned that each case must be decided on its own facts and there may be situations (although rare) where common occupation does not provide a sufficient connection. This reinforces the importance of carefully structuring the ownership and occupation of agricultural property and any changes to those arrangements.

This article originally appeared in Private Client Adviser on 18th November 2013. Fiona Graham is a Partner in the Private Client and Tax department

To view more recent articles, click here or visit our Twitter page

How to find us:
London Bankside

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

London Mayfair

Mayfair Office

6 Grosvenor Street
London
W1K 4PZ

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Oxford

Oxford office

6 Worcester Street
Oxford
OX1 2BX

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Bankside Office

240 Blackfriars Road
London
SE1 8NW
DX 53 Chancery Lane

Telephone: +44 (0)20 7629 7411
Fax: +44 (0)20 7629 2621
Email: bh@boodlehatfield.com

Get directions

Contact us