Farmers must manage grazing lets to secure tax relief

Landowners who let grass on seasonal agreements must play an active role in its management if they want to claim business tax relief, according to a recent ruling.

The decision concerned landowner John Allen in Northern Ireland, who let 4ha of pasture to a neighbour for seasonal grazing and silage.

As well as using the land himself for keeping animals sold in the market and grazing it himself over the winter, Mr Allen supplied fertiliser to the tenant and engaged a contractor to cut weeds and hedges.

When Mr Allen appealed after HMRC rejected his claims for capital gains tax taper relief (now abolished) the tax tribunal ruled  he had occupied the land and had taken responsibility for its husbandry and should, therefore, be allowed relief.

See also: Business Clinic: Should we let the farmland out?

“This new decision adds further weight and clarification to the previous case law,” said Jeremy Moody, secretary and adviser at the Central Association of Agricultural Valuers.

“Although the case revolves around a conacre (seasonal grazing) agreement in Northern Ireland, the ruling is extremely pertinent to landowners with grazing or cropping agreements across the UK.”

Dawn Mayo, senior tax manager at Evolution ABS in Somerset, said: “This case highlights that landowners producing grass who wish to be treated as farmers for tax purposes, must play an active role in managing the grass crop.

“In particular, it is important that landowners take responsibility for fertilising, weed control and boundary maintenance if they want to qualify for tax reliefs.”

Are you, like many other farms, missing out on tax claims for R&D?

If you’re a limited company, you could be eligible for tax credits if you’re carrying out R&D on your farm. For more information and to find out if you’re eligible visit our R&D tax credits page.

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