A Midland legal firm has successfully won an HMRC tribunal appeal which has helped protect the eligibility of farmhouses for relief from Inheritance Tax.
The case, conducted by Alan Neal from Worcestershire-based MFG Solicitors, appealed an earlier HMRC decision on a farmhouse which had belonged to a Mr Golding as part of a smallholding near Lichfield which he had farmed for 65 years.
Following Mr Golding’s death in March 2007, Agricultural Property Relief (APR) was claimed on the 16 acre farm to reduce the liability to Inheritance Tax on his estate. HMRC accepted the claim for the land and buildings but rejected it for Mr Golding’s three-bedroom farmhouse.
Alan Neal from MFG said: “This is undoubtedly a landmark case but importantly, it’s a victory for common sense and the judgement accepted there was no absolute financial test for whether a house was of a ‘character appropriate’. Had the Revenue’s appeal been successful, it would have had a major impact in narrowing the definition of character appropriate.”
The tribunal also accepted that as farmers aged and their work rate dropped, reduced business turnover and profitability did not of themselves mean that the farmhouse would cease to qualify for APR.
The character appropriate test is a vital measure HMRC use in determining eligibility for APR and considers whether the dwelling in question is of a character appropriate to the farm as a whole.
The Revenue has until mid-July to lodge an appeal if they wish to challenge the decision.