Inheritance Tax Reliefs and Grazing Licences

The recent case of Charnley and another v HMRC [2019] has ruled in favour of a farmer's estate seeking to claim agricultural property relief (APR) and Business Property Relief (BPR).

During his lifetime, Mr Gill allowed other farmers to graze their livestock on his agricultural land under annual grazing licences. Mr Gill was involved in the day-to-day checking of the livestock and maintenance of the land and grew vegetables on an acre of the land.

Mr Gill's estate claimed APR in respect of the farmhouse, outbuildings and agricultural land and BPR in respect of farm machinery.

HMRC claims

HMRC claimed that as Mr Gill had let out his land on grazing licences, APR could only be granted on the basis of ownership, which meant APR was not available in respect of the farmhouse and outbuildings. HMRC also claimed that the business carried out by Mr Gill was an investment in land, which meant that BPR could not be claimed in respect of the farm machinery.

Mr Gill's estate appealed to the First Tier Tribunal on the grounds that the farmhouse and other buildings were occupied for the purposes of agriculture and the business was that of farming and not of wholly or mainly holding investments.

Tribunal decision

The Tribunal held in Mr Gill's estate's favour stating that the activities carried out by Mr Gill were those of a farmer, working an active farm and that he operated a farming business. This meant that APR could be claimed on the farmhouse and other buildings and BPR could be claimed on the farm machinery.

In reaching its decision, the Tribunal considered Mr Gill's records of farming work carried out by him and took into account witness testimonies. It is therefore important that anyone seeking to make such a claim keeps thorough contemporaneous records of their activities and involvement with farming carried out on the land.