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Farming – Agricultural Property Relief |
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It can be difficult for owners of farmhouses to obtain Agricultural Property
Relief (APR), which might otherwise significantly reduce IHT. The starting
point is that APR applies to the ‘agricultural value’ of the property,
calculated as if the property was ‘subject to a perpetual covenant
prohibiting its use otherwise than as agricultural property’.
However, case
law now makes it clear that this will not cover the value that might be given
to the property by lifestyle buyers who might push up the price. Moreover,
it has also been established that only farmers who live in a farmhouse in
order to farm the land ‘on a day-to-day basis’ will qualify for the relief.
Thus it will now be very hard to get APR if the farming operation is wholly
contracted out. The moral is to try and involve the owner in the farming
process as much as possible.
This is a brief summary of possible tactics:
Contract Farming Agreements
- Ensure the farm is run from the farmhouse (ie the farm office,
paperwork and documentation should be there).
- Ensure that all meetings with the contractor and agronomist are held
at the farmhouse and are minuted (to show active involvement).
- Be personally involved in the day-to-day management of the farm and
of the contractors. Do not delegate management to an agent.
- Ensure all invoices are made out to them – not the contractor.
Lifestyle farmers
- If the house is out of proportion to the land farmed, consider
increasing the acreage by buying adjoining land.
- Ensure the house is the centre of the farm (farm equipment and
perhaps some livestock should be in evidence).
- Get involved in the day-to-day management of the farming business
(even if it is done by computer from the City).
Set aside a room in the house as the farm office and ensure that the
farm records are kept there, phone calls taken etc.
Elderly or infirm farmers: the farmhouse may not be treated as ‘occupied
for the purposes of agriculture’ if a farmer is too old or too ill to run the
farm. Accordingly elderly farmers should not rely on getting APR and
should seriously consider moving from the farmhouse if they intend to
pass it on to the next generation.
Semi-retired farmers: a farmer who is in a partnership and remains living
in the farmhouse but has handed over the running of the farm to the next
generation may not be a ‘farmer’ and may not be occupying the house
for ‘agricultural purposes’. Source: Ashton Graham. © Practical Lawyer
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November 2007 |
