Golding v HMRC May 2011  

The First-Tier Tax Tribunal recently ruled that a farmhouse is entitled to full agricultural property relief (APR)  from inheritance tax even though the aged occupant only sold a few eggs to a handful of customers.

HMRC accepted the claim for APR on the land and other buildings but they did not accept that the 3 bedroom farmhouse, which was in a poor state of repair, was eligible for the relief.  The deceased had farmed a 16-acre smallholding in Staffordshire since 1965.

HMRC argued that the three-bedroom farmhouse was not eligible for APR because it was not of a “character appropriate” for APR purposes.  A Notice of Determination that the farmhouse did not qualify for APR was subsequently issued by HMRC.

The Tribunal heard that the level of activity on the smallholding had decreased over the years and, in the period leading up to his death, Mr Golding had grown vegetables mainly for his own consumption and sold a few eggs to some 15-20 customers.  Whilst the level of profits was below the National Minimum Wage, it was concluded that the deceased was still working his holding, as a farm, when he died.

On the main issue of whether the farmhouse was or was not of a “character appropriate” for APR the Tribunal concluded that on the basis of the historical facts of the holding, the type of property, as well as the taxpayers’ intentions and actions, the house should qualify for APR.

The Tribunal also stated that it would be unreasonable to expect the activities of an 80-year old to be extensive in nature. It was also clear from the taxpayer’s actions that he intended to carry on farming. This was shown by the purchase of new equipment by Mr Golding shortly before his death.

HMRC have until mid-July to appeal this decision.