08 October 2011

Rural property news: Farmhouse relief


The First Tier Tax Tribunal has given a welcome decision for landowners in the recent case of HMRC v Golding, involving the application of agricultural property relief (‘APR’) to farmhouses.
Mr Golding died in March 2007 owning a home on a smallholding of approximately 16 acres in Staffordshire. Mr Golding farmed the 16 acres for 65 years but the intensity and profitability of the farming dropped during the later years of his life. Towards the end of Mr Golding’s life, much of the farming produce was used for Mr Golding’s own consumption and only modest profits were being made overall. On his death, Mr Golding’s executors claimed APR for both the farmhouse and the 16 acres of farmland.
HMRC accepted that the 16 acres of farmland qualified for APR but denied APR in respect of the farmhouse, which was a three bedroom property in a state of disrepair. The principal basis of HMRC’s objection was that the farmhouse was not of a ‘character appropriate’ to the farmland.
The Tribunal rejected HMRC’s arguments. It is positive news for landowners that HMRC failed in its attempt to narrow the definition of ‘character appropriate’. In particular, HMRC’s argument that there is a single objective test for APR based upon the financial viability of the farming operation to sustain the farmhouse was rejected. The decision confirmed that the correct test to be applied in APR claims for farmhouses is a broad approach involving an analysis of a number of different factors (as set out in Antrobus). Each case has to be looked at ‘in the round’ and it was acknowledged that a drop in farming productivity or profits as farmers grow older does not in itself mean a farmhouse will fail to attract APR.

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