The recent tribunal decision in Golding v Her Majesty’s Revenue and Customs (HMRC) has provided important clarification on whether Agricultural Property Relief (APR) on Inheritance Tax is likely to be available on certain farmhouses.

The Relief is stated to apply to ‘any farmhouses, cottages or buildings, which are of a character appropriate to the property’.  This means that the buildings must be ‘proportionate in size and nature to the requirements of the farming activities conducted on the agricultural land or pasture in question.’

Initially, HMRC had refused to accept the three-bedroom farmhouse in question as appropriate for the relief since the farming income of the smallholding was limited in relation to the size of the house.  However, the tribunal reversed HMRC’s decision after taking into consideration several factors relating to the use of the land and the property.  Although the small holding was only used for growing some vegetables and eggs for sale at the time of the owner’s death, this was consistent with the fact that the owner was well past retirement age so it would be unreasonable to expect the farming activities to be any more extensive.  He had purchased new farming equipment so the tribunal could conclude that he intended to continue to use the land for farming purposes.

The case is interesting as it shows that cases should be looked at in all the circumstances, taking into account any relevant circumstances such as age and past use.

HMRC has until mid July to appeal the decision if it wishes to do so.  Further advice in relation to APR can be obtained from David Farr or Keith Darvill on 01708 757575 or email david.farr@ker.co.uk or keith.darvill@ker.co.uk