Charnley v HMRC [2020] WTLR 93

WTLR Issue: Spring 2020 #178

1. WILLIAM CHARNLEY & 2. MAXWELL HODGKINSON AS EXECUTORS OF THE ESTATE OF THOMAS GILL (DECEASED)

V

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS

Analysis

Mr Gill’s estate included the house in which he lived, a brick barn and outbuildings and 21 acres of permanent pasture. During the relevant period Mr Gill did not own any livestock. He allowed farmers to graze their livestock on his agricultural land under annual grazing licences. It was not disputed that the house was of a character appropriate to the farm.

HMRC refused agricultural property relief (‘APR’) in respect of the value of the house, barn and outbuildings on the basis that neither the house nor outbuildings were occupied for the purposes of agriculture, and refused the claim to business property relief (‘BPR’) in its entirety on the basis that the business carried on by Mr Gill consisted wholly or mainly of making or holdings investments the executors appealed.

Evidence was given that Mr Gill repaired fences and netting, cleared ditches, harrowed and rolled fields and personally checked the stock on his land twice daily. He claimed Single Farm Payment and complied with the requirements that imposed. The executors argued that Mr Gill’s involvement in the land constituted ‘agriculture’; HMRC argued that it constituted no more than general maintenance and management of the land, and that a person could qualify for Single Farm Payment simply by maintaining the land in good environmental condition.

The issues for the court were:

  1. 1) Was the house a ‘farmhouse’, constituting ‘agricultural property’ within the meaning of s115(2) IHTA?
  2. 2) Did Mr Gill occupy the house and other buildings for the purposes of agriculture throughout the period of two years leading up to his death?
  3. 3) Was the business carried on by Mr Gill ‘relevant business property’, or did it consist wholly or mainly of making or holding investments?

Held

  1. 1) The house was a farmhouse and constituted ‘agricultural property’ within the terms of s115(2) at the date of Mr Gill’s death. There are a wide range of activities which may constitute ‘agriculture’, and no special meaning need be attached to that term – Atkinson & Smith (executors of the Will of Atkinson (Decd)) [2010] UKFTT 108 (TC) followed. Although Mr Gill ceased owning livestock, his activities remained those of a farmer and he provided substantial work which could not merely be described as the provision of land for grazing. Limited weight could be attached to the receipt of Single Farm Payments, since they were by reference to a different statutory test.
  2. 2) There was a functional connectivity between Mr Gill’s occupation of the house and the agricultural activities which took place on the farm. He did not occupy the house solely as a residence, but farmed day to day and remained in control; his occupation was ancillary to those daily farming activities – HMRC v Atkinson [2012] STC 289 applied. The barn and outbuildings stored machinery which Mr Gill used on the farm for the purposes of agriculture.
  3. 3) The business carried on by Mr Gill was ‘relevant business property’, since it did not consist wholly or mainly of making or holding investments. Activities such as hedge-cutting, harrowing, fencing, mole-trapping, herding, lookering and husbandry were those of a farmer, rather than merely an investor maintaining his property – PRs of Grace Graham v HMRC [2018] UKFTT 0306 (TC) followed.

Appeal allowed.

JUDGMENT JUDGE JENNIFER DEAN: INTRODUCTION [1] This appeal concerns the availability of agricultural property relief (APR) and business property relief (BPR) from inheritance tax (IH) in respect of the value of assets forming part of the estate of Thomas Gill. [2] By way of background, Mr Gill died on 20 November 2013 aged 79. Mr …
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Counsel Details

Dr C. McNall (18 St John Street Chambers, 18 St John Street Chambers, Manchester, M3 4EA, tel 0161 278 1800, email clerks@18sjs.com) appeared for the Appellant.

Mr J. Brinsmead-Stockham (11 New Square, Lincoln’s Inn, London WC2A 3QB, tl 020 7242 4017, email tom.rook@11newsquare.com) instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

Cases Referenced

  • Arnander v RCC [2006] STC (SCD) 800
  • Atkinson & Smith (executors of the Will of Atkinson (Decd)) [2010] UKFTT 108 (TC)
  • Golding v HMRC [2011] WTLR 1183
  • Golding v HMRC [2011] WTLR 1183, [2011] UKFTT 351 (TC)
  • Hanson v HMRC [2013] STC 2394
  • Hanson v HMRC [2013] UKUT 0224 (TCC)
  • Harrold v IRC [1996] STC (SCD) 195
  • HMRC v Atkinson [2012] WTLR 197
  • HMRC v Atkinson [2012] WTLR 197, [2012] STC 289
  • HMRC v John Carlisle Allen [2016] UKFTT 0342 (TC)
  • HMRC v Vigne [2018] UKUT 357 (TCC)
  • John Carlisle Allen v HMRC [2016] UKFTT 0342 (TC)
  • Lloyds TSB Bank Plc (Antrobus Deceased) v Inland Revenue [2002] WTLR 1435
  • Lloyds TSB Bank Plc (Antrobus Deceased) v Inland Revenue [2002] WTLR 1435, [2002] UKSC SPC00336
  • McCall and Keenan v HMRC [2011] WTLR 1823
  • McCall and Keenan v HMRC [2011] WTLR 1823, [2009] NICA 12
  • PRs of Grace Graham v HMRC [2018] UKFTT 0306 (TC)
  • RC v George [2004] STC 147 (CA)
  • Rosser v IRC [2003] WTLR 1057
  • Rosser v IRC [2003] WTLR 1057, [2003] STC (STD) 311

Legislation Referenced

  • Agriculture Act 1947
  • Agriculture Act 1947, s11
  • Income Tax Act 1988
  • Income Tax Act 1988, s832
  • Inheritance Tax Act 1984
  • Inheritance Tax Act 1984, s1
  • Inheritance Tax Act 1984, s103
  • Inheritance Tax Act 1984, s104
  • Inheritance Tax Act 1984, s105
  • Inheritance Tax Act 1984, s106
  • Inheritance Tax Act 1984, s107
  • Inheritance Tax Act 1984, s115
  • Inheritance Tax Act 1984, s116
  • Inheritance Tax Act 1984, s117
  • Inheritance Tax Act 1984, s2
  • Inheritance Tax Act 1984, s3
  • Inheritance Tax Act 1984, s4
  • Inheritance Tax Act 1984, s5