What exactly is a 'farmer'? and what exactly is a 'farmhouse'? In answering those questions, the First-tier Tribunal (FTT) gave important guidance to the agricultural community and delivered a substantial Inheritance Tax (IHT) saving to the heirs of a deceased landowner.
On his death, aged 79, the man was the freeholder of 11 plots of land and lived in a house set in the heart of his holdings. The executors of his estate sought agricultural property relief (APR) totalling £1,129,200 on the basis that both the house and the land constituted agricultural property and were thus exempt from IHT by virtue of Section 115(2) of the Inheritance Tax Act 1984.
HM Revenue and Customs (HMRC) granted APR in respect of the land, but refused it in respect of the house and outbuildings. Due to the landowner's advancing years, most of his land had, prior to his death, been licensed to others for use as grazing. On that basis, HMRC took the view that he had ceased to be a farmer, and his home had ceased to be a farmhouse, before he died.
In allowing the executors' appeal against that decision, the FTTfound that the man's activities were throughout those of a farmer, working an active farm, and that he had occupied his home as a farmhouse right up until the day he died. Despite his age, he had boots on the ground and was often up at the crack of dawn, helping to manage livestock. He had always retained responsibility for, amongst other things, fencing, hedging, draining and harrowing his fields.
The man having still been engaged in running an active farming business on the date of his death, his estate also qualified for £17,700 in business property relief.