What makes a house, a ‘farm house’ – and get tax relief?

HMRC have issued new guidance on what qualifies as a farm house for the purposes of Agricultural Property Relief following the 2011 decision in Golding v HMRC

Where a property qualifies for Agricultural Property Relief (‘APR’) its value is not taken into account when deciding the value of a deceased’s estate for Inheritance Tax Purposes.

Golding v HMRC [2011] UKFTT 351 (TC) March 2011

HMRC had refused to allow APR on the deceased’s farmhouse claiming it was not agricultural property and that the house was not of a character appropriate to the agricultural land owned by the deceased.
The First Tier Tax Tribunal decided the property did qualify for APR. They held HMRC couldn’t argue that the house was not a ‘farmhouse’ under IHTA84/S115(2), so the case was heard on character appropriate grounds only.

Facts of the case
The deceased’s father purchased the farm, which comprised 16.29 acres, for him in 1940. He had worked there all his life, bringing up two children. The farm remained unchanged at the time of the deceased’s death in 2007.
The farm comprised a mixture of free range chickens, cattle, milk, wheat, barley, oats, fruit and vegetables. The farming operations where scaled back from 1985 onwards. In the period before his death the deceased only kept 70 hens and sold eggs from the farmhouse, to his regular customers until his death.
The Tribunal found that the lack of profit was not detrimental to a decision that the farmhouse was of a character appropriate to the land and highlighted the deceased was making a profit, though relatively small. It therefore qualified for APR.

Each case will always be decided on its own merits. This case though may be useful to farmers who have substantially scaled back their activities in later life.

Further guidance on what does or does not qualify for APR can be found on the HMRC website