The muddy waters surrounding the application of agricultural property relief (APR) are still no clearer, despite two recent and somewhat conflicting cases. With 100% relief at stake, APR is a very valuable relief but the ‘see-saw’ decisions on APR make planning very difficult for owners of farming land.

The case of HMRC v Atkinson [2012] saw a “win” for the Revenue, and appears to be a very harsh decision against the taxpayer.

APR was denied on a bungalow, which was occupied by the late Mr Atkinson between 1966 and 2002, whilst Mr Atkinson was an active farmer and described as the “Senior Partner” of the farming partnership with his son, daughter in law and grandson. Relief was denied on the bungalow as Mr Atkinson had, after a short spell in hospital, spent the last 4 years of his life in a care home, and thus, at the date of death, the bungalow was not occupied for agricultural purposes. This was despite the fact that Mr Atkinson remained a partner in the farming partnership until the date of his death, took part in discussions relating to the farm at least once a week, and occasionally returned to the bungalow, which remained furnished and housed his belongings.

By contrast, the case of Golding and Middleton (Golding’s Executors) v HMRC, was a win for the taxpayer. In this case, it was accepted that a farmhouse qualified for 100% APR, despite a very low accompanying acreage (16.29 acres) and limited profits from the farming enterprise. In previous cases, relief has been denied in relation to houses, with low acreage, where the houses were considered to be too grand or luxurious to qualify as a farmhouse.

In this case, it was quite the reverse, and relief was permitted as the property was in such a poor state (there was a downstairs bathroom, and no electricity supply), that it was held that “it would only be acceptable as a farmhouse” and not as a domestic residence. The implication is that the scruffier the house, the more likely the relief will be allowed; which may be good tax advice, but not make for very comfortable living.