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Strutt & Parker Celebrate Good News For Landowners In Landmark Tax Case


Strutt & Parker has welcomed a tribunal decision rejecting an appeal by HMRC commissioners in their case against Andrew Michael Brander – executor the late fourth Earl of Balfours Whittingehame Estate in East Lothian which has given helpful guidance for landowners wishing to mitigate inheritance tax by using Business Property Relief (BPR).

HMRC appealed after Judge Gordon Reid QCs decision last year (May 14, 2009) to allow an appeal by Mr Brander against an HMRC determination denying inheritance tax business property relief (BPR) in respect of the Whittingehame Farming Company (WFC) and assets such as land, houses and cottages which were let to third parties.

Nicholas Watson, head of land management for Strutt & Parker, says: This is good news for landowners, particularly when they have faced significant tax increases in the past few months. It shows the original judgement was right in the first place, which will be a relief to land owners using BPR as part of their inheritance tax planning.

The Earl of Balfour, who died on June 27, 2003, became a life tenant of the Whittingehame Estate on the death of his father in 1968. The estate included three let farms amounting to about 371 acres, two in-hand farms covering 269 acres, 26 let houses and cottages mainly let on short assured tenancies two sets of business premises, sporting rights, policy parks let on a seasonal basis and woodlands and forestry. The estate extended to about 1,907 acres.

Before 2002, Lord Balfour operated the WFC either as sole trader or in partnership. The trustees transferred the estate to him outright in 2002 and the following year he went into partnership with his nephew and heir Mr Brander.

The question was whether or not BPR should apply to the mixed business on the basis that it was mainly one of trading (farming activities) rather than investment (the letting of farm cottages). In 2008, HMRC put forward a number of alternative arguments to deny BPR. The commissioners said the ownership test had not been satisfied because Lord Balfour had entered into the partnership less than two years before his death, questioned whether it had been run as a single business and if the letting income consisted wholly or mainly of the holding or making of investments.

The tribunal judge found that the estate had been managed as a single business and, additionally, that the ownership test had been satisfied. He also stated that any suggestion that the lettings income was a way of making investments was to belittle the efforts required properly and profitably to manage the various components on an estate of this nature.

The tribunal has now upheld that decision and dismissed HMRCs appeal.

Mr Watson said the analysis contained in the judgement was useful for landowners and land managers.

The judgement provides us with guidance on the yardsticks to use when assessing whether a business is to be treated as one of mainly trading or mainly investment activity.

He said: Their analysis of the difference between trading and non-trading property is helpful and it is heartening to see that they did put not much weight on the capital value of assets.

The argument that the capital value of assets should be given less weight than the profitability and time spent is useful for hereditary estates. They looked at this in the round and applied the test in the round, which is important particularly as far as capital values are concerned.

It outlines the importance of running the estate as a whole with one set of accounts and one insurance policy. Organising and structuring estate arrangements so the business and investment strands are looked after as one is important preparation, and careful record keeping is key if a composite business argument is to be put forward.

The landowners aim was the long-term preservation of capital assets. It was recognised that the estate was not intended for sale and that is a useful point. If landowners can prove they treat themselves as custodians stewards who are simply trying to leave the estate in a better condition than when they took it on and live off the income in the meantime, then that can go some way to taking the emphasis away from the capital value test.

All in all, this is a good decision for taxpaying landowners across the UK and I have no doubt it will prove useful for tax planning in the future.

Strutt & Parker is one of the largest and most successful independent property partnerships in the UK with a network of offices throughout England and Scotland. Established in 1885, the business provides professional support on all matters relating to land and property – whether offices or farms, country houses or business parks, leisure centres or shooting rights, new home construction or international real estate. With a dedicated, forward-thinking team offering expert knowledge and sound, professional advice, Strutt & Parker can ensure that businesses, farmers, landowners, house-buyers and international investors can make their assets perform to their best ability. To see what else the business has to offer, visit our website at

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