Unoccupied home not 'business asset’

Posted: 13th February 2012

Sheep in FieldOwners of agricultural businesses should note the implications of a recent decision of the Upper Tribunal after a successful appeal by HM Revenue and Customs (HMRC) regarding the availability of Agricultural Property Relief (APR) for Inheritance Tax (IHT) purposes.
HMRC appealed against a decision to allow a claim for APR in respect of a bungalow which had been occupied by an elderly partner in a farming business. The effect of the claim was to reduce the IHT on his estate when he died because the bungalow was treated as a ‘business asset’ and thus qualifying for APR.
HMRC’s appeal was based on the fact that for the last four years of the man’s life the bungalow had remained empty and the elderly partner had lived in a care home. He did not actively participate in the farming business during that time, although he remained a partner.
The Upper Tribunal considered that there was an insufficient link between the need for the bungalow to be occupied and the agricultural business activity. For APR to be allowed the bungalow would have to have been ‘occupied for agricultural purposes’ for the seven years prior to the man’s death: this requirement was not met as a matter of fact.