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Does the letting of farmland for grass keep qualify as "for the purposes of agriculture"?

A client who for many years owned and ran a farm of around 80 acres has sold the farm and most of the land, retaining around 30 acres and a barn.  Of the land retained 25 acres is let for keep, the other 5 are used privately 

I am considering my clients IHT position and believe he may still qualify for APR in respect of the 25 acres on the basis that it has been owned for more than 7 years and was farmed by him until recently and is now being occupied by another/others "for the purposes of agriculture".

My question is simply is the letting of grass keep sufficient to be treated as "for the purposes of agriculture" as distinct simply from being rental income?

Following on from this, would there be any benefit in continuing to prepare farm accounts?  Would this add any weight to the claim?

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By RSJ
22nd May 2012 15:50

Probably....

Growing of grass is deemed to be for purposes of agriculture

Is there a grasskeep agreement which is renewed every year? It is important for your client to have costs such as hedge trimming, fertiliser, fencing, draining etc going through his accounts ?

Also who claims the Single Farm Payment ? Is this your client ?

In this circumstance I would continue to prepare farm accounts but ensure paperwork is correct.

 

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22nd May 2012 16:22

Agricultural use

It is sufficient that it is used by someone else for agricultural purposes to get APR - either under a Farm Business Tenancy or a grasskeep agreement. For APR, it doesn't matter if the income is rental income rather than trading profits.

The main purpose of using a grasskeep agreement has, in the past, been to try to preserve entitlement to BPR (extending relief beyond just agricultural value) to support claims for APR on a farmhouse (where land let subject to an FBT wouldn't be taken into consideration) and to retain entitlement to capital gains tax reliefs such as Entrepeneurs' Relief - all of which rely on occupation as a farmer by the owner rather than a tenant. HMRC are increasingly challenging grasskeep arrangements as being not occupation as a farmer by the owner           but as holding an investment so your client should be warned that, whilst APR is protected as long as the use falls in the definition of agricultural, BPR and CGT reliefs may be challenged.

Cathy

 

[email protected]

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By f
07th Aug 2012 17:54

LAND OCCUPANCE

YOU QUOTE    

HMRC are increasingly challenging grasskeep arrangements as being not occupation as a farmer by the owner   OR GRAZIER !!!!! I PRESUME        but as holding an investment so your client should be warned that, whilst APR is protected as long as the use falls in the definition of agricultural, BPR and CGT reliefs may be challenged.i

 

If a lease ee ( grazier )  has lease written and agreed by both parties  that grazier has right to graze the subject of land delineated in red on plan annexed  for the purpose of mowing or grazing  and for no other purpose whatsoever .the said land is available to claim on for sfp  purposes and you are the sole claimer on the subjects....whether activity ( use falls in defination of agriculture )is carried out or not !!  and this agreement is an integral part of active business why would hmrc challenge it ??  

 

you say reliefs may be challenged   ! do you mean that non trading issue would arise and no business relief allowed or only specific reliefs ?

 

 

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22nd May 2012 16:39

Thanks ...

... very much for both of your very helpful comments.

I am very grateful and will act on your advice.

Regards

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