The Farmhouse- Will It Qualify For Agricultural Property Relief?

In order to claim the relief it is important that the farmer lives in the farmhouse.  More importantly the farmer must run/manage the farm from the farmhouse.  It is possible therefore that if the farmer has retired and the land is let on grazing agreements that agricultural property relief may not be awarded in relation to the farmhouse.  This may be so even if the farmer has farmed the land for 40 years before retiring. The farm house should be the hub of the business – if it is not it may just be a house without the benefit of agricultural property relief.

For a farmhouse to qualify for agricultural property relief it must be “of a character appropriate to the property”.  HMRC see this as a major issue when considering whether to allow relief or not, and each case will be decided on its own facts.  There are factors which HMRC will take into account – some of the factors are whether the house has historically been the farmhouse or not, whether the farmhouse is proportionate to the farm buildings and farm land and the agricultural activities that take place, whether a reasonable person would regard this as a farmhouse or a house with land and would someone recognise this as a farmhouse (the so called elephant test).

Even if the farmhouse is considered to be agricultural property occupied for the purposes of agriculture for the relevant period it is still only possible for agricultural property relief to apply to the agricultural value of the farmhouse.

In some cases HMRC will argue that the farmhouse has a higher market value.  Whilst the agricultural value may therefore qualify for relief, there will be a surplus value which will not qualify.  This may occur for example where HMRC consider that someone other than a farmer would be interested in purchasing the property and they would be willing to pay a higher price for the farmhouse than a farmer would.

In all cases it is always useful to have historical pictures showing the farmhouse and a farm diary which records the meetings and decisions that have taken place in the farmhouse