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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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When is property not occupied?

Examples where a property is not occupied for the purposes of agricultural relief are

  • a person who lets a farm to a tenant farmer who himself carries on the trade of farming is not in occupation.
  • arrangements which do not confer exclusive occupation will not necessarily destroy the lessor’s ‘legal occupation’ of the land (IHTM24071), but could end the lessor’s occupation of the land for the purposes of agriculture’. The farming circumstances of each arrangement will need to be carefully considered. Any areas of difficulty should be referred for advice (IHTM24073).
  • Any land let on a farm business tenancy will confer exclusive occupation upon the tenant so the land owner will not be in occupation for the purposes of s.117(a).

The above should be borne in mind when considering whether or not, any farmhouse (IHTM24091) is occupied for the purposes of agriculture (IHTM24060). If the land is let under a farm business tenancy, it is highly unlikely the deceased will have had sufficient involvement on the land and so the requirements outlined at IHTM24091 for a farmhouse to be occupied for the purposes of agriculture will not have been met.

  • a salaried employee, such as a farm manager, is not in occupation of the land - their employer is the occupier
  • a person who leaves an agricultural property vacant is not physically in occupation and may not be in occupation for the purposes of agricultural relief, as in the case of Harrold deceased and Atkinson (see below). The period of non-occupation in both cases was considerable. It is going to be a question of fact, extent and degree in each case whether vacating a property so remedial work can be carried out, or because of ill health, puts the availability of relief at risk. So a necessary absence whilst a building is cleared of rot and re-roofed would normally be disregarded provided that the remedial works are carried out in a business like manner.
  • Cases where the owner is absent due to ill health can be contentious and difficult to decide. You will need to ascertain the length of, and reasons for, the absence. Any desire on the part of the transferor to return will be relevant but this should be viewed in the light of how realistic such a return might be. Other relevant factors might include the state of the house, its state of readiness for a return, whether the transferor’s possessions were retained ready for a return. The question of how matters such as payment of insurance, utility bills and council tax charges were organised might also be relevant. As always it is the function that the house is fulfilling that is paramount and it is possible that even if the transferor is not actually resident there that the evidence will show that the house remained the centre of the farming operations. In Atkinson, below, the Upper Tribunal used an example of a cottage temporarily let for 1 year to a person unconnected to agriculture and concluded the cottage would not be occupied for agricultural purposes (IHTM24092). This does not mean that a property will be automatically disqualified from relief if the agricultural occupier is absent for a year, as each case will need to be judged on its own facts. However, after a year of non-occupation, it may be difficult to demonstrate that the requisite occupation for agricultural purposes has not been broken.
  • Sale of all the farming assets represents prima facie evidence of the abandonment of agricultural activity.

In Executors of G W Harrold deceased v CIR Sp C 71 the Special Commissioner considered a number of leading cases, quoting at length from

  • Graysim Ltd v P&O Property Holdings Ltd [1995] 4 AER 831,
  • Hampstead BC v Associated Cinema Properties Ltd [1994] 1 AER 436 and
  • Arbuckle Smith & Co Ltd v Greenock Corporation [1960] AC 813. 

The facts were:

On 1 November 1982 the deceased and his son M E Harrold bought the 960 acre holding Barwick Hall Farm in equal shares as tenants-in-common, and carried on business as partners. From that date until 1 July 1983 the vendor was allowed informally to remain in occupation. The deceased never lived in Barwick Hall; his son, then 18, lived a few miles away. No one lived in the Hall from July 1983 until February 1988, when the vendor left it was empty apart from normal fixtures and some carpets. The new owners decided that the Hall was to be the son’s home after he married, but this was not an immediate prospect at 20 February 1986 when the deceased gave his half share to his son.

The Hall, neglected and in need of substantial renovation when it was bought was held on a care and maintenance basis until mid-1985. Even then major works of renovation were carried out using staff from the farm only as and when funds were available.

The Special Commissioners found that neither of the partners occupied the Hall for the purposes of agriculture before February 1988, when the son took up residence. Not only was there no physical use for those purposes, it was not occupied by the owners. Consequently the Hall was not occupied for the purposes of agriculture.

In HMRC v Atkinson and another [2011] UKUT 506 (TCC) the deceased resided in a care home for several years before his death. HMRC denied agricultural relief on his bungalow which remained uninhabited for the period he was in care, The Upper Tribunal held that:

‘In order for there to be occupation of the bungalow for the purposes of agriculture once Mr. Atkinson had gone into the care home, there still needs to be found some relevant connection between the use of the bungalow and the activities on the rest of the farm.’

The Tribunal found that the bungalow was not occupied for the purposes of agriculture for the entirety of the period required and that, to confirm IHTA84/S117 is satisfied, ‘the search is for some sort of connection between the residential use of the cottage and an agricultural purpose sufficient to make the use occupation for the purpose of agriculture.