| A recent decision by the Special Commissioners in | | | | development value because it has planning permission, |
| Belfast highlighted a distinction between Agricultural | | | | or even “hope value” because it might get |
| Property Relief (APR) and Business Property Relief | | | | planning permission in the future, that part of its value is |
| (BPR) that is of importance to anyone who owns | | | | not covered by APR. Those who know their land |
| agricultural land. The case has the snappy title of | | | | values will appreciate that, even with the price of |
| “Philip Norman McCall and Bernard Joseph Anthony | | | | farmland up to £6,000 per acre these days, the |
| Keenan (personal Representatives of Eileen McClean | | | | development value, or hope value, may well be many |
| deceased) v The Commissioners for HM Revenue | | | | times the agricultural value. |
| and Customs”, and it dealt with APR and BPR. | | | | This is why it has been considered good tax planning |
| When you die, Inheritance Tax (IHT) is payable on the | | | | to ensure that the landowner remains in |
| value of your estate to the extent it is greater than the | | | | “occupation” of the land. In the case of a farmer |
| “nil rate band” which is currently £312,000. | | | | and his land, BPR comes to the rescue where APR |
| There are a number of reliefs that can be claimed, and | | | | fails to provide relief for the full value of the land. |
| the two most important are BPR and APR. | | | | BPR does not draw a distinction between agricultural |
| APR reduces the value of “agricultural property” | | | | value and market value. If the landowner is using the |
| in your estate by up to 100%, giving what is effectively | | | | land for his trade at the time of his death, then BPR |
| an exemption from IHT, providing certain conditions are | | | | (also at 100%) covers any of the value of the land |
| met. It would take a book to cover the detail of this, | | | | which is not covered by APR. |
| but what we are concerned with here are the | | | | There has been a perhaps rather glib assumption that |
| exemptions available when you “occupy” land | | | | provided you met the “occupation” condition for |
| “for the purposes of agriculture”. | | | | APR, you were deemed to be farming the land |
| Obviously, a traditional farmer who owns and farms | | | | yourself, so BPR would kick in as described above. |
| his land will qualify for this, but on the margin there are | | | | The Special Commissioner in Belfast did not agree. He |
| those who own the land but receive payment from | | | | accepted (indeed it was not in dispute) that APR was |
| someone else for using it. This commonly occurs when | | | | due on the land involved, because it was being grazed |
| a farmer is getting on in years, or perhaps he has died | | | | under an agreement for “agistment” (which is |
| and his widow does not want the trouble of actually | | | | the Northern Irish equivalent of grass keep), but he did |
| farming the land herself. Or perhaps he is a | | | | not accept that this automatically meant that it was |
| “lifestyle farmer” who bought the place because | | | | also eligible for BPR. |
| he enjoys the country life, but is too busy to farm it | | | | The Special went through the written agreements in |
| himself. | | | | minute detail, and also looked closely at the evidence |
| One way in which the “occupation” condition | | | | of what work was done by the landlord on the land, |
| has traditionally been met in such cases is to let the | | | | and he reached the conclusion that although what was |
| land for “grass keep”. Grass keep is an | | | | done was (but only just) “a business”, it failed to |
| arrangement between the landowner and a third party | | | | attract BPR because it was a business of “making |
| (“the grazier”). The grazier has the right to graze | | | | or holding investments”, which is specifically |
| his animals (sheep or cattle, typically, because horses | | | | excluded from BPR. |
| are not “agricultural” except in special cases) on | | | | The decision included this description of the grass keep |
| the land for a period of less than the full 365 days in | | | | arrangement: |
| any year, and the landowner undertakes to deal with | | | | |
| hedging, ditching, mending gates and fences, and | | | | “The activities of the business consisted of the |
| generally keeping the land in good condition. | | | | making available of its major asset to other persons |
| It is well settled in law that a properly drawn up | | | | for payment without the separate provision of any |
| agreement for grass keep has the effect of leaving | | | | substantial other goods or services” |
| the landowner in “occupation” of the land “for | | | | More succinctly, the Commissioner also said: |
| the purposes of agriculture”, so on his death APR | | | | |
| can be claimed at 100%. | | | | “The land was used not to make (part of) a living |
| In fact, 100% APR is also available in most cases | | | | on it, but to make (part of) a living from it; it was used |
| where the land is let out on an ordinary tenancy to | | | | as an investment”. |
| another farmer, but there are two crucial differences | | | | That is a neatly expressed distinction that I expect to |
| as a result of the landowner no longer being the | | | | appear in letters from HMRC in future when the |
| “occupier”. One of these is that unless the | | | | difference between the agricultural and the real value |
| landowner is also the farmer, the farmhouse occupied | | | | of land qualifying for APR is important. Just to end with |
| by the landowner will not qualify for APR, and the | | | | a flavour of the gap between agricultural value and |
| other is that APR is only available on the | | | | open market value, in the McClean case, the |
| “agricultural value” of the land. | | | | agricultural value of the land was £165,000. |
| The “agricultural value” of land is its market | | | | The open market value was £5,700,000, because |
| value estimated on the assumption that it could never | | | | the land had been zoned for development by the local |
| be used for anything except farming. If the land has | | | | council! |