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HMRC internal manual

Inheritance Tax Manual

Overview of agricultural relief: Sole farming businesses

You should establish details of occupation (IHTM24070) and ownership (IHTM24100) from the information provided.

If the deceased had been actively farming their land for the relevant period (as opposed to making it available for others to farm) then business relief (IHTM26001) will be available for any non-agricultural or development value (IHTM24151) of the land and the farm buildings used.

However, you should pay careful attention to claims for 100% relief for farmhouses and cottages. You should ask yourself

  • Was the farmhouse (IHTM24091) the centre of the farming operations conducted on the land?
  • Was the farmhouse or any cottage truly occupied for agricultural purposes?
  • Are the farmhouse and any cottages of a character appropriate to the land involved in the business? (IHTM24050)

Relief is not available in respect of development value or residential premium (IHTM24151) over and above the agricultural value of farmhouses because the primary function of the house is as a residence.

Once you have established the facts you should consider carefully any doubtful cases, such as those where the deceased appeared to be no more than an agricultural landlord, or a cottage appears to be occupied subject to a protected tenancy.