The Golding Case, a Victory for Common Sense – say Saffery Champness
A First-tier Tax Tribunal decision, in the case of Golding v Her Majestys Revenue and Customs (HMRC), has resulted in an important Judgement for the taxpayers involved as well as owners of agricultural holdings generally.
The Judgement, handed down on the 18th May, followed an appeal against a previous HMRC determination that the residence, owned by Mr. Golding, was not eligible for Inheritance Tax Agricultural Property Relief ( APR). The deceased had farmed a 16-acre smallholding in Staffordshire since 1965.
When Mr. Golding died, Agricultural Property Relief (APR) was claimed on the smallholding to reduce the liability of his estate to Inheritance Tax. However, while HMRC accepted the claim in respect of the land and buildings of the smallholding, they did not accept the claim that the 3-bedroom farmhouse was eligible for any relief, because it was not of a character appropriate for APR purposes. A Notice of Determination that the farmhouse did not qualify for APR, was subsequently issued by HMRC.
The recent Tribunal Hearing addressed the issue of the farmhouse being of a character appropriate for APR and concluded that, on the basis of the historical facts of the holding, the type of property, as well as the taxpayers intentions and actions, the house should qualify for APR.
The level of activity on the smallholding had decreased over the years and, in the period leading up to his death, Mr. Golding had grown vegetables mainly for his own consumption and sold a few eggs to some 15-20 customers. Whilst the level of profits was below the National Minimum Wage, it was concluded that the deceased was still working his holding, as a farm, when he died.
The Judge also stated that it would be unreasonable to expect the activities of an eighty year old to be extensive in nature. It was also clear from the taxpayers actions that he intended to carry on farming. This was illustrated by the purchase of new equipment by Mr. Golding shortly before his death.
Mike Harrison, a partner of Saffery Champness Landed Estates & Rural Business Group, says: This is a very important Judgement for rural taxpayers. It not only underscores that a farmhouse must be of a character appropriate to qualify for APR, but also that the Antrobus tests still apply.
In this case, HMRC put forward an argument that was based on the limited financial viability of the 16-acre holding. Earlier cases, in particular Antrobus, confirmed the broad basis of a claim for relief on a farmhouse. However, a wider range of factors need to be considered, including the size of the holding in relation to the house, the cropping and stocking history of the agricultural holding, and what has been termed the elephant test of knowing a farmhouse when you see it. In the Golding Case the Tax Tribunal seems to have accepted, once again, that cases should be looked at in the round.
Another aspect of the case is an acknowledgment that farmers and their business activities change as they get older. Although, Mr. Goldings farming activities had declined in recent years, the reduction did not on its own exclude the property form APR.
Mike Harrison concludes: It should be noted that HMRC have until mid-July to appeal and it remains to be seen whether they will do so. However, the case should nonetheless be a landmark one in terms of APR decisions and how they are determined.