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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Agricultural purposes: Introduction

The phrases ‘agricultural purposes’ and ‘for the purposes of agriculture’ are interchangeable, and we use both phrases to mean the same thing in this guidance. The ‘occupation for the purposes of agriculture’ condition under IHTA84/S117 is a single condition. You should not ask who is in occupation and then ask the subsequent question of whether that occupation was for agricultural purposes, You must decide who is in ‘occupation for the purposes of agriculture’. For example, in owner and occupier situations the owner will usually be in occupation for agricultural purposes. In a landlord and tenant situation the tenant will usually be in occupation for agricultural purposes. However, where land is let on informal arrangements you will need to consider this question carefully and the answer will depend on the facts of each case.

To qualify for agricultural relief from Inheritance Tax property must be both

  • agricultural property (IHTM24030) and
  • occupied for agricultural purposes.

It is important that both requirements are satisfied, as it is possible to have agricultural property, such as a farmhouse (IHTM24036), that is not occupied for the purposes of agriculture, for example if the farmhouse is occupied by a retired farmer who has let the qualifying agricultural land to a tenant.

Because both conditions must be satisfied, you must consider land (IHTM24031) farmhouses (IHTM24036), farm cottages (IHTM24034) and all other buildings (IHTM24035) separately and be prepared to restrict agricultural relief where part of property is not used for agricultural purposes.

It is your responsibility to decide whether property is occupied for the purposes of agriculture (IHTM24060), but close liaison with the DV on this aspect will be helpful.

In many cases business relief will be available as an alternative.