Farming estates & inheritance tax

This case study demonstrates the expertise of our Wills, Trusts & Tax Planning team who have recently settled a farming case, saving a potential IHT liability of over £500,000.

Over the last couple of years we have noticed an increase in the number of farming estates being challenged on claims for Agricultural Relief (AR) and Business Relief (BR) by HMRC – IHT.

Claims for tax relief have been and continue to be invaluable for beneficiaries who wish to become the next generation of farmers.

Mrs P was a crop farmer with some grazing land. Mrs P became physically unable to carry out the farming work herself and put a Farm Business Tenancy in place with the tenant farmer dealing with the day-to-day farming activity. This arrangement was later ended by Mrs P, who took the land back in hand and instead employed the tenant farmer as a contractor to carry out the physical farming work under her instruction.

The Revenue questioned the AR claim on the farm and we had to demonstrate that the running of the farm was carried out by Mrs P rather than her contractor. Other issues arose concerning the farmhouse, use of the farm buildings, income from let cottages and a drop in farm income in some years which the Revenue tried to argue as demonstrating that the farming operation was winding down.

We successfully secured AR for the majority of the farm. In addition, BR was secured on the cottages and also on a telephone mast.

It is clear that the Revenue is challenging more aspects of farming estates and in light of this we would recommend that farmers review their farming arrangements and seek legal advice to clarify issues concerning AR and BR.