Although the facts of the case were complicated, the issue at stake was straightforward. The question was whether the late 4th Earl of Balfour was running a single business over a traditional agricultural estate and, if he was, was that business wholly or mainly the making or holding of investments so that no business property relief was available.
HMRC denied the executors’ claim for business property relief but the taxpayers were successful on appeal. It is understood that HMRC are appealing the decision to the Court of Session although the grounds are not yet known. In the meantime, although this is a case to watch carefully, it is too early to decide how important the decision is.
The points to highlight from the decision are:
- although there were originally two sets of accounts in respect of the farming and letting parts of the business, it was held that there was a single business. The high level of involvement by the 4th Earl in all aspects of the running of the estate was no doubt influential, but would be unusual on many estates;
- no evidence was provided by HMRC on the various indicators to show that the business was wholly or mainly the making or holding of investments. The judge made it clear that this enabled him to draw favourable conclusions from the taxpayers’ evidence; and the taxpayers’ evidence may be vulnerable to scrutiny by HMRC. For example, different accounting periods were used when comparing turnover for the trading and letting parts of the business.
The appeal will be followed closely but a detailed review by a higher court may yet prove unhelpful to owners of traditional agricultural estates.