Grasskeep arrangements and IHT – time for review?
June 20th, 2008A recent Special Commissioner’s decision on an Inheritance Tax case in Northern Ireland suggests that where land is subject to a grazing arrangement it may not necessarily qualify for Business Property Relief.
The case concerned 33 acres of pasture in County Antrim owned by a Mrs McClean who died in 1999. For many years other farmers had taken the fields for grazing. As pasture, the land qualified for agricultural property relief on its agricultural value but in this case there was substantial value over and above agricultural value due to the prospects of development. The Executors sought to claim Business Property Relief on this additional value.
The Commissioners decided that letting land on a grasskeep type arrangement was akin to running a business that consisted of wholly or mainly of holding investments and, as such, the land did not qualify for BPR. Consideration was given to the works undertaken by the deceased on the land and it was noted that her son-in-law undertook fencing and drainage works as well as weed control on her behalf but it was determined that these ancillary activities were not so substantial as to be a distinct part of the business.
This ruling should be of concern to those who own land with potential value above its agricultural value and make use of grasskeep arrangements. Any arrangements should be reviewed or preparation should be made for a potential tax liability. With grasskeep arrangements under increased scrutiny, this judgement could also lead to it being even more difficult to obtain Agricultural Property Relief on a farmhouse.
For more information on this case and its implications, contact Tom Killen – tom@killens.org.uk