APR: scaling back farming activities in later life
- AuthorJessica Newton
A recent case at the First-tier Tribunal, Charnley v HMRC, concerned a farmer that had historically farmed the land in question with his father.
In the years prior to the farmer’s death, his farming activities had been scaled back to reflect his increasing age. In the two years prior to his death, he did not own any livestock and allowed other farmers to graze their livestock on his agricultural land under annual grazing licences.
The First-tier Tribunal decided that, although the manner in which the land was farmed had been modified with time, and reflecting his increasing age, his activities did not cease to be for the purposes of agriculture in respect of Agricultural Property Relief (APR). Therefore, they found in favour of the taxpayer and allowed the claim for APR.
The issues in the case concerned:
- whether the farmhouse actually constituted a farmhouse for the purposes of APR, and,
- whether the farmer had occupied the farmhouse and other buildings ‘for the purposes of agriculture’ throughout the two-year period prior to his death.
HMRC rejected the claim made for APR, and the appeal was lodged with the First-Tier Tribunal.
The farmer’s executors appealed on the basis that the agreements with the other farmers went beyond simple grazing licences. The deceased was responsible for moving the livestock from field to field depending on where there was grass and the condition of the ground, working the fences and hedges, dictating what could be put on the land and when, and was described as ‘the boots on the ground’.
HMRC argued that the farmer’s activities were scaled down during the years before his death to such an extent that he could no longer be considered to be farming the land attached to the property and occupying it for the purposes of agriculture.
In reaching their decision, the First-tier Tribunal stated that the farmer’s ‘occupation or vocation – had always been, and remained, that of farming.’
They accepted that there had been a change to the business, in that the farmer had gradually ceased rearing livestock, but they did not accept that this was sufficient to alter the true nature of his work. It was decided that the fact the farmer did not wish to undertake certain tasks in his latter years did not detract from his activities as a whole, and to isolate the tasks carried out would be an artificial exercise.
The tribunal endorsed the sentiments of an earlier decision (Goulding v HMRC) that a farmer does not cease to be a farmer, or cease to be in occupation of the farmhouse for agricultural purposes, simply because he becomes elderly or unwell.
This is a victory for the taxpayer and shows that the courts are willing to look at circumstances in the round when considering inheritance tax reliefs. This decision will be reassuring to elderly farmers who are considering the need to scale back their farming activities in later life. However, it should be noted that each case is decided on its own merit.
If you are considering scaling down your farming enterprise, you need to ensure that you still meet the requirements so that Agricultural Property Relief is not lost. If you have any questions, please contact our specialist Agriculture and Estates team.
I am an agriculture solicitor based in our Colchester office. I can be contacted on 01206 217312 or firstname.lastname@example.org.