Ownership Not Necessary for APR Claim

Agricultural Property Relief (APR) is a relief that applies for Inheritance Tax (IHT) purposes. It is similar to Business Property Relief (BPR).

Both operate to reduce the value of the property for the purposes of computing the taxable estate of a person when they die. Accordingly, a successful claim for APR or BPR will normally reduce the IHT burden suffered by the estate.

A recent case dealt with the IHT liability of a deceased man who had lived in a farmhouse. Farmhouses and farm cottages normally qualify for APR if they are used for agricultural purposes (which includes where the property is the home of a person engaged in agricultural activities) for the two years prior to the death of the occupant.

A dispute arose when APR was claimed in respect of the value of the deceased’s interest in the farmhouse. He had lived in the property but did not own it. It was owned by a family trust and, under the trust deed, he had the right of occupancy for life. IHT law, in such circumstances, can cause the value of the property to fall into the deceased’s estate.

HM Revenue and Customs (HMRC) argued that no APR could be claimed because although the property met the ‘agricultural occupation’ condition necessary, APR could only be claimed by the owner of the property (the trust). They considered that a claim for APR in respect of a single agricultural building (the farmhouse) must ‘be part of a larger agricultural estate whose value is being charged to IHT at the same time’.

However, the First-Tier Tribunal found that ‘the purpose of the relief is to reduce the tax burden on agricultural property, including farmhouses, which have been occupied for the required period(s) for the purposes of agriculture’ and rejected HMRC’s argument.