Farmer next to tractor in field

Inheritance tax – are you a farmer?


I am regularly asked how closely HM Revenue & Customs look at farming businesses when claims for Agricultural Property Relief (APR) or Business Property Relief (BPR) are made. A recent case heard by the First Tier Tax Tribunal involving a farmer in Lancashire gives the answer.

Thomas Gill had been a farmer all his life until he died in 2013 at the age of 79. The first point to note is that it has taken six years for Mr Gill’s Executors to sort out the amount of IHT, and it is possible that the case may still be appealed to a higher court.

Case background

  • Woodlands Farm consisted of a house, land and traditional buildings.
  • Most of the land was let on seasonal grazing licences.
  • Mr Gill looked at the stock on a daily basis, moved them between fields, repaired fences and ditches, and controlled weeds.
  • He cultivated an acre of ground on which he grew vegetables. Some of these were “sold” to a local shop in exchange for other goods.
  • Mr Gill was actively involved in the farm until he died and used his own machinery for most of the tasks. He had nine tractors and two diggers, which were largely in working order. Some of the tractors, eg the Nuffield 465 and Fordson Major, had been owned for many years.
  • Mr Gill claimed Single Farm Payment on all his land.

The tax issues

  • There was no argument over the land, as it was clearly being farmed and it did not matter who the active farmer was. It therefore qualified for 100% APR.
  • HMRC denied APR on the farmhouse because they did not accept Mr Gill as an active farmer.
  • HMRC also denied APR on the farm buildings because they did not consider them to be occupied for agricultural purposes.
  • HMRC also denied BPR on the value of the machinery and other farming assets because they considered his business to be one of holding investments rather than an active farming business.
  • Mr Gill was described as a wealthy man, which implies that he had other non-farming assets. This suggests that the failure to obtain 100% APR or BPR would have resulted in 40% IHT being payable.
  • Mr Gill did not have any children, so could not benefit from the Residence Nil Rate Band. This allows a person to leave their house to a child or grandchild with an exemption of up to £300,000, rising to £350,000 in April 2020.

A happy ending?

The tribunal accepted that Mr Gill was an active farmer and granted APR on the farmhouse and buildings, and BPR on the equipment and other business assets. However, as mentioned above, it is possible that HMRC may appeal the decision.

One of the key points was that the executors were able to demonstrate the level of day-to-day involvement Mr Gill had in the farming activities. In particular, the owner of the cattle which grazed the land gave a statement saying that as Mr Gill was an experienced farmer he only needed to check them on an occasional basis. Had the occupier of the land been a neigbouring farmer, or the owner of the land did not have either the time or experience to look after the cattle, then the outcome may have been different.

In order for the farmhouse to qualify for APR it was essential that Mr Gill was involved in the farming activities and that the house was of a character appropriate to the land being farmed. The house was described as “spartan and basic” which probably helped to justify the APR claim. Had all the day-to-day care of the cattle been undertaken by the owner of the cattle, the APR claim would have been less likely to succeed.

There is no mention in the decision as to whether fertiliser was applied to the land, and if so, by whom. Normally this is a key consideration to identify who the farmer is. In this case Mr Gill was deemed to have carried out enough activities to be classed as the farmer.

Finally, a word about barter arrangements. In this case, Mr Gill exchanged vegetables for goods from his local shop, and also reduced his grazing charge in exchange for the grazier carrying out hedge cutting. The effect of this is to reduce the level of farming activities on paper and can make a successful claim for APR or BPR more difficult.

For more information or advice about Inheritance Tax, call 01228 690200 or email

Contact David