Originally from: Farmtalking
                        
From: ...

Originally from The Times on line – January 27, 2003

http://www.timesonline.co.uk/article/0,,2–556337,00.html

Farming families hit by 'stealth tax' on their houses
By Valerie Elliott, Countryside Editor
 
THE Inland Revenue is to levy a 40 per cent inheritance tax on some farmhouses, farming land and other farm buildings. At present, people who inherit agricultural property, including the land, can claim up to 100 per cent inheritance tax relief. The Revenue is challenging that relief on the basis that many farmhouses are no longer “character-appropriate” to the farm business.

Tax officials also believe that many farmhouses are no longer an integral part of farming as farmers move into other money-making ventures to boost their income.

The Country Land and Business Association and the National Farmers’ Union want ministers to clarify the position. Rural campaigners believe that at a time when the Government is encouraging farmers to embark on business projects to help to revive the rural economy, people could find their children unable to inherit the family farm.

Some farmers have given up farming and rent their land. Others have diversified so much that their income from farming is only a tiny proportion of their turnover. Former farm buildings have also been converted into offices and craft workshops.

In those cases, the Inland Revenue may insist that the house is no longer an integral part of the farm business because the farmer is no longer involved in farming. Receiving rental income for land worked by another farmer does not count as agricultural income for tax relief purposes.

Lord Haskins, the Government’s Rural Policy Adviser, said: “This must be an attempt by the Inland Revenue to stamp out bogus farming where someone from the City snaps up a big farm, lives in the house and rents out the land. I see nothing wrong with that, but if the Revenue is targeting bona fide farming families and penalising them with more tax, then I think this should be looked at urgently.”

Sir Donald Curry, chairman of the Policy Commission on the Future of Farming and Food, said: “This could lead to the discouragement of diversification. Anything that obstructs structural change would present a problem in delivering the innovative countryside we need.”

Concern has been raised after an attempt by the Inland Revenue to deny agricultural property relief on the 127-acre estate of Rosemary Antrobus, who owned and farmed Cookhill Priory at Inkberrow, Worcestershire, all her life. The Inland Revenue considered that the 18th-century house, which had been extended over the years, was not of a character appropriate to the farm.

Even though the Revenue lost the case because lawyers proved that the house was used as farm office and canteen, and that the owner was involved in all aspects of the farm business, property experts believe that it will be difficult for other farmers to win exemption from inheritance tax because many have set up projects unrelated to farming.

Andrew Grant, head of the Country Land and Business Association in Worcester, and the agent who acted for the Antrobus estate, said: “This is just another backdoor tax, a tax by stealth.”

Jim Quinn, of Morton Fisher solicitors in Worcester, said that the Inland Revenue was “targeting the largest houses that are gentrified or have some historical importance”.

The Revenue said: “Agricultural property relief is available for buildings when they are used as farmhouses so long as they are of a character appropriate to the farm they are part of. That helps target the benefit of agriculture by denying relief for cases where there is no real farming going on or the residential aspect is out of balance with the farming.”
 
http://www.timesonline.co.uk/article/0,,2–556337,00.html