BIM55065 - Farming in tax law: short-term grazing lets

Land let for grazing, or `grass keep', is normally let under an agreement for a period of less than 365 days - often, in fact, 364 days - with no right of renewal. The agreement is effectively a licence over the land and avoids creating a legal tenancy which might give the grazier security of tenure.

Under such a grazing agreement, the owner normally remains in occupation of the land and is regarded as occupying it wholly or mainly for the purposes of husbandry. The owner is therefore farming and is chargeable on the grazing rent under Case I of Schedule D (see CIR v Forsyth Grant [1943] 25TC369). Thus for instance, a farmer who ceases to keep his or her own livestock and commences instead to grant short-term grazing licences over farm land of which he or she remains the owner or tenant, is treated as continuing the same trade of farming.

The person taking the grazing is chargeable, if that activity amounts to a trade or part of a trade, on his or her own profits, for example, as a cattle dealer, under Case I of Schedule D. If he or she is in fact farming elsewhere (that is, by virtue of the occupation for the purposes of husbandry of other land), and the grazing is an integral part of those farming activities, then the grazing profits may be included in the computation of farming profits.

Where grazing is let for a period of 365 days or more, see BIM55060.