There is good news for owners of farmhouses. Owners of agricultural land can qualify for 100% relief from inheritance tax, but claims for agricultural property relief are not straightforward especially with farmhouses.
In particular, HM Revenue & Customs (HMRC) has tried to restrict relief for those farmhouses that it considered to be out of character with the related farmland – for example, where a large mansion is situated on just a few hundred acres of farmland.
The decision in the landmark Antrobus case was that relief is only available for the agricultural value of a farmhouse – not its open market value – and that relief may be denied entirely if the occupier of the farmhouse is not involved in farming on a day-to-day basis. So-called ‘lifestyle’ farmers might therefore find the entire value of a farmhouse is subject to tax.
However, a recent tribunal ruling has resulted in a big setback to HMRC’s endeavours to restrict the relief. HMRC contended that a property owned by a farmer, Dennis Golding, was too large in relation to the farmland and concluded that it must therefore be a family home with no connection to the farming business. The tribunal decided that the farmhouse was large enough for a working farmer but not for an entire family – it therefore qualified for relief. If you are a farmer then the ruling sets a precedent for when relief is eventually claimed against the value of your estate.
