A previous article that I wrote gave a brief summary of Agricultural Property Relief (APR): Within that article, I made reference to the requirements for APR to apply in situations where the property in question may not actually be farmed or occupied by the owner of the property and there is an agreement or letting in place.
I have set out below the most common forms of lettings and how they are treated for the purposes of APR.
Grazing Licence / Grass Keep Licence
Grazing or grass keep licences are usually simple agreements whereby the landowner allows the farmer to graze his animals on the land or take a crop a crop of grass from the land. They can also be referred to as profit a prendre. Such agreements would usually only be used for the letting of bare land and so if buildings are also to be let a Farm Business Tenancy should be considered.
If a letting is deemed to be a licence, which will depend upon the facts, the landowner is likely to be treated as still being in occupation of the land.
If this is the case, it should be possible for the landowner to be able to claim APR after just 2 years of ownership.
However, caution should be had to ensure that such licences are not only properly drafted but also that the occupation and use of a property will remain strictly in accordance with the licence. Simply because you label the agreement as a licence does not necessarily mean that it will remain that way if the occupation and activities are contrary to it.
Farm Business Tenancy
A Farm Business Tenancy (FBT) is an agricultural tenancy created on or after 1 September 1995 and is governed by the Agricultural Tenancies Act 1995.
Land and property let under an FBT will generally benefit from APR at a rate of 100%. However, it should be noted that because the landowner would not be considered as being in occupation of the property, the property must have been owned and used for agricultural purposes for at least 7 years.
Agricultural Holdings Act (AHA) Tenancy
An AHA Tenancy is a tenancy created before 1 September 1995 and is governed by the Agricultural Holdings Act 1986. Unless neither the extra-statutory concession F17, nor the transitional provisions apply, property let under such a tenancy will qualify for APR but only at a rate of 50%.
As with property let under an FBT, because the landowner would not be considered as being in occupation of the property, the property must have been owned and used for agricultural purposes by the landowner for at least 7 years.
Contract Farming and Shared Farming Arrangements
If such arrangements are structured properly, they should not create a tenancy with the contract/shared farmer and, therefore, the landowner would still be treated as being in occupation of the land.
Therefore, as with the grazing licence above, the landowner will be able to claim APR after 2 years of ownership. However, caution should be had with such arrangements so as to ensure that they are structured correctly.
In summary, if one wishes for property to benefit from APR in the future, it is vital to consider how it is let.