APR – Atkinson v HMRC  UK FTT 108
When considering the availability of Agricultural Property Relief (APR) for Inheritance Tax (IHT) we must remember the provisions of s.117 IHTA 1984. The property must have been either:
- Occupied by the transferor for the purposes of agriculture throughout the period of 2 years prior to the date of the transfer; or
- Owned by the transferor and occupied by him or someone else for the purposes of agriculture throughout the period of 7 years prior to the date of the transfer
Where a farmer through Illness or old age is not in occupation then it would seem that there is no actual relief. In practice HMRC will allow 3 months absence but there must be an intention to return and it must be possible to re-occupy the property. This little case provides some useful clarification where the senior partner in a farming partnership had moved into a care home but the ‘bungalow was still used to accommodate the diminishing needs of the senior partner’.
William Atkinson acquired and began to farm Abbotsons Farm in 1957; this included a farmhouse and 195 acres. Subsequently, a bungalow was built on the farm and he entered into a partnership with his son. William moved into the bungalow and the son and daughter-in-law lived in the farmhouse. In 1980 the daughter-in-law became a partner in the partnership and William granted an Agricultural Holdings Act 1986 (AHA 1986) tenancy of the farm to the partners.
In 1994 Gary, William’s grandson was taken into partnership but sadly shortly afterwards in 1995 William’s son died. As a result, a written agreement was drawn up to the effect that William, his daughter-in-law and grandson farmed the farm as partners and the agricultural tenancy of the farm was to be a partnership asset. William covenanted that he would take all steps necessary to protect the partners as tenants under the AHA 1986 and the tenancy of the farm was assigned to William, his daughter-in-law and grandson.
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William became ill in 2002 and entered a care home on discharge from hospital where he died on 20 October 2006. He remained a partner until his death; taking part in discussions about the farm each week and occasionally returning to the bungalow.
It was not disputed that:
- The bungalow constituted agricultural property for the purposes of s.115(2) IHTA 1984;
- William owned the bungalow;
- William remained a partner in the partnership for the seven years ending with his death; and
- As a partner William and his partners participated in the rights conferred by the agricultural tenancy.
HMRC argued that William was not in occupation of the bungalow and it was not used for the purposes of agriculture whilst he was living in a care home. The fact that the bungalow was part of an AHA 1986 tenancy does not of itself mean that it was agricultural property since such a tenancy can include land that is not agricultural; what counts is whether the occupation complies with s.117.
Sir Stephen Oliver QC, as chairman of the tribunal, concluded that s.115(2) defines a class of properties which are agricultural property and this includes both those which are directly used in agricultural activity, such as land and farm buildings, but also those which are less directly employed but nonetheless provide the structure within which the agricultural activities are conducted e.g. farm cottages (such as the bungalow in this case); the function of which is to accommodate people engaged in the agricultural activities.
He pointed out that there is nothing in the legislation requiring the occupation to be continuous or to be occupied by a particular type of person such as a farm owner or employee since in s.117(b) it says the property must be occupied “by him or another”.
In this case the occupation was by the three partners in the partnership under the AHA 1986 tenancy, a tenancy that covered the whole of the farm, which together was occupied for the purposes of agriculture by the partners. The bungalow was actually occupied by William for 22 years but the last four years of his life it was left as it was when he used to live there and no-one else moved in. He continued to participate in partnership matters but from his care home and not the bungalow.
The Tribunal therefore allowed the APR on the bungalow – a useful case indeed.
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