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HMRC internal manual

Inheritance Tax Manual

Agricultural purposes: Stud farms

IHTA84/S115 (4) provides that, for the purposes of agricultural relief, agriculture may be taken to include the breeding and rearing of horses on a stud farm and the grazing of horses in connection with those activities, and any buildings used in connection with those activities may be regarded as farm buildings.

  • One difficulty is that there is no definition in the Act of what constitutes a stud farm, but it is considered that an essential requirement is for an element of horse breeding carried on in a systematic manner, with proper record keeping.

You should usually decide whether a stud farm qualifies for agricultural relief by looking at

  • the information on the file,
  • other HMRC sources, such as the tax papers for the business or SAV (Livestock).
  • business accounts for the 5 years before the death

In arriving at your decision you should consider aspects such as:

  • the age of the deceased both at death and when the farm was acquired
  • the length of the period of ownership
  • the number of horses held at the date of death and the breeding record in recent years
  • details of advertising and publicity for the stud, plus full particulars of sales
  • accounts of the enterprise, and details of the precise nature of the trading activity, including purchases and sales of horses

With any other horses, there will need to be a link with agricultural use, for example, where horses are used as draught animals on a working farm, the grazing of such horses will constitute agricultural use. This will also be the case where the horses being grazed are declared to be part of the food chain under the horse passport scheme introduced at the end of November 2003. The grazing of horses used for leisure pursuits will not constitute occupation for agricultural purposes; Hemens v Whitsbury Farm and Stud Ltd [1988] 2 WLR 72 and Wheatley’s Executors v CIR (SpC 149) [1998] STI 559.

Where horses are grazed in connection with, for example, a livery business run by the deceased/transferor, business relief may apply as an alternative.