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Agricultural property relief – Will your farmhouse qualify?

21 March 2014

A farmhouse that is eligible for agricultural property relief (APR) will provide significant benefit to anyone wanting to reduce their liability to pay inheritance tax (IHT) upon their death.

To qualify, a farmhouse must be character-appropriate to the land being farmed and be classified as a working farm.

In recent years, and partly due to the squeeze on revenues as a result of the recession, HM Revenue and Customs are keener than ever to challenge claims for APR.

The recent case of Hamson v HMRC was won by the tax payer which will bring comfort to farmers where their farmhouse and the land are owned separately.

In this case, the deceased was the life tenant of a trust that owned the farmhouse. The deceased’s son and family lived in the property for a number of years before his father’s death and the son farmed a further 200 acres unrelated to the trust. The question before the tribunal was whether the farmhouse and the land needed to be in common ownership or common occupation when considering the character appropriate test to qualify for APR.

The tribunal decided that common occupation was required and that the deceased was able to claim APR on the farmhouse, even though he did not own the majority of the land used by his son in the farming business that was run from the farmhouse.

For more information on APR please contact our agriculture & estates department.

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Adam Hale BA (Hons), TEP, FALA
Senior associate, solicitor
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