Further relaxation of agricultural property relief for Inheritance Tax purposes
HMRC's appeal against the decision of the First-Tier Tribunal in the Hanson case has failed.
Mr Hanson (the deceased) lived in the farmhouse until 1978. He then moved out and his son moved in.
At the date of Mr Hanson's death, his son occupied the farmhouse and 223 acres of land that he farmed but Mr Hanson owned the farmhouse and part owned around 60 acres of the land farmed by his son.
When Mr Hanson died in 2002 Agricultural Property Relief was claimed in respect of the farmhouse and the adjoining agricultural land. HMRC determined that the house did not qualify for APR. It was common ground between the parties that if the 128 acres not owned by Mr Hanson was to be taken into account in assessing whether the house was "of a character appropriate to the agricultural land" APR would be available on the farmhouse.
HMRC argued that there must be common ownership between the land and the house for APR to apply; Mr Hanson's son (as executor) argued that common occupation was sufficient.
The First Tier Tribunal agreed with the son and that decision has now been upheld in the Upper Tribunal. Common occupation is sufficient to establish a nexus between the land and the house to qualify for APR. The case has implications not only for farmers who have moved out of the farmhouse but retain ownership of the land, it will also have importance for those claiming APR in respect of cottages and/or farm buildings which are grouped with farmhouses within the definition in Section 115(2) IHTA 1984.
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