HMRC loses court case over inheritance tax
Her Majesty’s Revenue and Customs (HMRC) has lost its bid to charge inheritance tax on farmhouses where the farmland and farmhouse are not owned by the same person.
After a long-running court case, the Upper Tax Tribunal decided that agricultural property relief from inheritance tax on farmhouses is still allowable where the farmhouse and farmland is not owned by the same person – but is occupied by the same person.
The case in question relates to the Hanson family. While Mr Hanson senior owned the farmhouse for IHT purposes, his son was actually living in the property and also farming the 215 acres of land. Of the 215 acres, 128 were owned by the son with just 25 acres owned directly by the father, with the rest either rented or owned by other parties.
On the death of Mr Hanson senior, HMRC accepted that the farmhouse was occupied for agricultural purposes, but did not accept that it was “of a character appropriate to the amount of land owned by the deceased and farmed by his son” as IHT is charged solely on the deceased's estate.
However, the Upper Tier Tribunal said that HMRC must take into account the entire area farmed by the son and that ‘common occupation’ therefore applied. The decision is seen as welcome for farming families who will now be able to apply for agricultural property relief where ownership of property and land is fragmented.
If you’d like advice on Inheritance Tax and future planning please contact Alistair Dobson at Lawson-West on 01858 445 480
