Positive Outcome at Recent Agricultural Property Relief Tribunal

We have in the past been presented with situations where a downsizing farmer has moved out of the farmhouse and given away much of the land, perhaps to the next generation, but has retained ownership of the farmhouse.  The farmer may have thought that they were acting prudently in attempting to do some succession planning, however, the reality of the situation is that it may have cost them the ability to claim agricultural property relief (APR) from Inheritance Tax.  HMRC’s guidance has been that there must be “common occupation” and “common ownership” between the farmhouse and the land.

I was therefore surprised (and pleased) at the decision made by the First-tier Tribunal in the recent case of Hanson v HMRC.  The tribunal held that when determining whether a farmhouse qualifies for APR, the farmhouse and the land must be in the same occupation, but need not be in the same ownership.  This decision will also be relevant to those claiming APR in respect of cottages and farm buildings.

As this is contrary to HMRC's existing guidance and to a previous non-binding decision of the Special Commissioner in Rosser v IRC, it must be considered likely that HMRC will appeal the decision.

Watch this space!