A leading rural tax expert has issued an alert to elderly farmers to get their tax affairs into shape following a renewed drive by the taxman to clamp down on agricultural property relief (APR) on land and farm buildings.
Stephen Meredith, partner and head of the taxation department at Midland law firm mfg Solicitors, has sounded the alarm following moves by HM Revenue and Customs to deny the tax break if it cannot be proven landowners are doing enough active farming work to qualify.
The crackdown has meant that estates of deceased elderly farmers have been left struggling to meet Inheritance Tax liabilities and interest payments.
The tax specialist’s warning comes after he successfully challenged HMRC in two recent cases where HMRC was seeking to deny APR to veteran farmers on their homes and, in one case, land as well.
Despite the two case wins Mr Meredith says he remains ‘deeply concerned’ that many farmers and their futures remain at risk if they have not got their affairs in order.
He said: “This is an area of tax law where HMRC have been increasingly taking a tough stance on the basis that elderly farmers are not carrying out sufficient agricultural activities to justify a claim for APR.
“In one case the farmer had passed away and because the probate papers referred to him as ‘retired’, HMRC argued his business was not commercial. We proved it was. In another case HMRC tried to deny APR because the farmer had reduced the scale of his operations. This was unsurprising because he was 84-years-old when he died.
“It would be nonsense that a farmer can farm all his life and then lose APR simply because old age forces him to cut back on his farming activities in his last years. If that was the case it would be very rare for any farmer who lives to a ripe old age to qualify. That surely cannot be the intention of the tax rules but it is what HMRC are trying to enforce.
“Farmers have to be aware of the crackdown and the general lack of understanding that HMRC have about the farming sector. Many farmers would be very surprised to be told that having farmed all their lives their estates will not qualify for full APR on their deaths. In some cases investment assets, such as barn conversions or let cottages, can attract business relief with proper planning.”
Both cases Mr Meredith successfully led were referred by other firms of solicitors, one in Somerset and the other in Wales.
As part of his support to the farming community, Mr Meredith and his team are offering free 30-minute telephone consultations to help farmers understand their tax position and obtain advice as to how they can improve it. Readers can telephone 01562 820181 or email firstname.lastname@example.org