Tax decision bolsters farmhouse relief case

An HMRC tribunal appeal has helped to protect the eligibility of farmhouses for valuable relief from Inheritance Tax.


The case appealed an earlier HMRC decision on a farmhouse which had belonged to a Mr Golding as part of a 6.5ha (16acre) smallholding near Lichfield which he had farmed for 65 years.

Following his death in March 2007, Agricultural Property Relief was claimed on the farm to reduce the liability to Inheritance Tax on his estate.

HMRC accepted the claim for the land and buildings but denied it in for the farmhouse, which was a small three-bedroom house in a poor state of repair.

“Had the Revenue been successful at appeal, it would have had a major impact in narrowing the definition of character appropriate,” said Clive Beer of Savills, who was an expert witness in the case for Mr Golding’s executors and family.

The character appropriate test is a key measure used by HMRC in determining eligibility for APR and considers whether the house in question is of a character appropriate to the farm as a whole.

The judgement was a very important and commonsense one, said Mr Beer. It accepted that there was no absolute financial test for whether a house was of a “character appropriate”.

It also accepted that as farmers grew older and their work rate dropped, reduced business turnover and profitability did not of themselves mean that the farmhouse would cease to qualify for APR. HMRC has until mid-July to lodge an appeal.

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