IHTM24036 - Agricultural property: Farmhouses
A residence must be either a ‘cottage’(
IHTM24034) or ’farmhouse’
to come within the definition of ‘agricultural
property’ in s115(2) IHTA.
A number of decisions have impacted on our view of what a
–‘“farmhouse’ for the purposes of s115(2)
is. Among the most important are:-
CIR v John M Whiteford and Son [1962] TR 157, in
which it was stated that
’afarmhouse is the place from which the farming
operations are conducted’
Rosser v IRC [2003] WTLR 1057, in which the
Special Commissioner concluded that
’itmust be a dwelling for the farmer from which
the farm is managed.’
Lloyds TSB Banking v Peter Twiddy (Inland Revenue Capital
Taxes)[DET/47/2004], in which it is stated
’a farmhouse is the chief dwelling-house
attachedto a farm, the house in which the farmer of
the land lives. There is, we think, no disputeabout the definition when it is expressed in
this way. The question is: who is the farmer ofthe land for the purpose of the definition in
section 115(2)? In our view it is the personwho lives in the farmhouse in order to farm
the land comprised in the farm and who farmsthe land on a day to day basis’
These statements lead to the conclusion that the occupant of a
’farmhouse’ must be a farmer. In other words,. the
person farming the land on a day to day basis. Whether a person is
actually a ‘“farmer’ of the land will depend on
all the facts of a particular case. So, a person with overall
control of an agricultural business is not necessarily a
‘farmer. The key factor is to identify if the occupant of the
house has a significant role in the management, or actual
operations, of the farming activity being carried out on the land
involved. Conversely, it is not necessarily the case that a
“farmer” of land is a person whose principal occupation
consists of farming the land.
The test is therefore essentially a
functional one. As the Special Commissioner in
Arnander and others (executors of McKenna, deceased) v
Revenue and CustomsCommissioners [2006] STC (SCD) 800 pointed out,
‘
the proper criterion is the purposeof the occupation’. Since in that
case the day to day farming was undertaken solely by contractors
and a land agent was responsible for the management of the land,
the deceased’s residence was not a ’farmhouse’.
So, you will need to investigate in detail exactly what the
occupier of the residence was doing in the way of agricultural
activity in the relevant period prior to the deceased’s
death, , to be able to determine whether their residence could
properly be called a ‘farmhouse’. You should be
particularly careful in cases where the farmer had retired and let
their land on grazing agreements.
However, a temporary cessation of activity(for example, due
to ill health)will not, in itself, prevent a residence being a
‘farmhouse’ if, on the precise circumstances of the
case, it can properly be considered as
functionally remaining attached to the farm, along
the lines described above.
For a house to qualify for agricultural relief as a
farmhouse it must also satisfy two conditions. It must
- be agricultural property, ( IHTM24030) and
- have been occupied ( IHTM24070) for the purposes of agriculture ( IHTM24060) for the requisite period.
Both tests can be contentious. The ownership ( IHTM24101) test may also need to be satisfied.
