Bath Business News’ weekly Expert Panel series continues with Nicola Owen, partner at Bath law firm Mogers, urging farmers not to gamble with their retirement.
These days we are seeing an increase in the number of farmers creating new businesses in order to diversify.
As farmers grow older and their health deteriorates it may be necessary to move to a residential home or reduce farming activities. But they need to also ensure they are protecting their loved ones when they are no longer here.
Under the inheritance tax rules, the agricultural value of agricultural property is not taxed at the usual 40%. Relief is available for agricultural land and also buildings such as a cottage or farmhouse, if they are appropriate to the agricultural land.
Two recent cases illustrate just some of the areas being targeted by HMRC and farmers need to be aware.
In the first of these, Mr Golding had farmed a smallholding for decades but as he grew old, his farming activities reduced until they consisted of selling eggs at his gate. HMRC denied relief on the value of his house on the basis that that the farming must be reasonably profitable.
However, the First Tier Tribunal said the question was whether Mr Golding had been farming, not whether he had been farming profitably and allowed relief on the house.
In the case of Mr Atkinson however, relief on the farmhouse was not available.
The elderly head of the farm had moved out of his house into a nursing home as his health failed, but had remained a member of the family farming partnership and took part in discussions about the business.
His bungalow remained furnished and his belongings were kept there. Due to none of the family having moved in to provide a continuing agricultural link, the tribunal ruled that the farming connection for the property had been lost.
The Golding case shows that lack of profitability does not mean that agricultural relief will be denied. Mr Golding carried on farming as best he could but it needs to be borne in mind that a lack of profitability due to retirement will undermine a claim. The Atkinson case shows that if a farmhouse owner cannot continue to occupy a property, then steps should be taken to ensure that someone else engaged in farming the land moves into the house, for example a farming family member.
As with all financial affairs, plans need to be in place before something happens to avoid problems for a person’s estate.
If you would like further advice please call Nicola Owen on 01225 750038 or Tom Chiffers on 01225 750054 or email Nicolaowen@mogers.co.uk or tomchiffers@mogers.co.uk.
