Many farmers could face much steeper inheritance tax bills after the latest ruling in the long-running “Antrobus” case.
The Revenue argues that farmhouses should not automatically be 100% exempt from inheritance tax under agricultural property relief rules.
The legal team that has been battling against the Inland Revenue in the case of a 51ha farm in Worcs, belonging to the late Rosemary Antrobus says a farmhouse should qualify for 100% relief.
Round one of the long-running litigation went to the taxpayer, whose tax burden was reduced, but the Revenue decided to pursue it further.
The Lands Tribunal has just ruled that only 70% of the house’s value should be considered as agricultural and inheritance tax must be paid on the 30% balance.
It is this decision and the precedent it sets that worries Jim Quinn of Midlands’ solicitor MGF.
“There have been more and more cases where the IR has said it wants tax on a proportion of the value of farmhouses – post Antrobus it will be asking for it in every case.
“This is an industry that can’t afford that sort of tax bill over a single generation.”
Savills’ Clive Beer said it was important that farmers were not bludgeoned into accepting IR demands for an automatic tax hit on 30% of a farmhouse’s value or it might become accepted as normal practice.
“If you own a property you have a problem and you need to plan your way out of that problem.
With a careful valuation it should be possible to ameliorate the demand by proving that a greater proportion of a house’s value should be considered agricultural, he said.
This could be done by using the proximity of farm buildings to the house as evidence, or by showing the house was actively used in running the business.
“There should be a process of farmification; you need to get the feeling that you are looking at a farmhouse not a gentleman’s residence.” Having the farm office in the house could be a good start, he added.