HMRCC v Hanson [2013] UKUT 0224 (TCC)

Analysis

Mr Hanson (the respondent) is the trustee for a trust created in 1957 by his grandfather, which gave his father Joseph Hanson (the deceased) a life interest. The trust consisted of a house in Milton Keynes.

The deceased lived in the house until 1978 and when he moved out the respondent moved in. There was no change in ownership of the property. The Hansons are a farming family and at the time of his father’s death the respondent owned and farmed 128 acres of land nearby, he rented a further 28 acres and farmed an additional 67 acres co-owned by him and the deceased and ran the farming operations from the property.

On the death of the deceased in 2002 the respondent claimed agricultural property relief (APR) in respect of the house together with adjoining agricultural land still owned by the deceased. By a notice of determination HMRC determined the house did not qualify for APR. The trustee successfully appealed to the First-Tier Tribunal and HMRC then appealed this decision.

Both parties agreed that if the 128 acres not owned by the deceased was to be taken into account when assessing whether the house was ‘of a character appropriate to the agricultural land’ under s115(2) IHTA 1984 then APR was available on the house. HMRC argued that there must be common ownership between the land and the house while the respondent felt that common occupation was sufficient.

Held (dismissing the appeal):

1. (1) Section 115(2) cannot be construed in isolation but within the context of the entire act and neither ownership or occupation are referred to in the legislation.
2. (2) Common occupation was sufficient to establish a nexus between the land and the house to qualify for APR.
3. (3) Adopting a common occupation approach does not undermine the structure of inheritance tax. APR is not only available to ensure farms can continue after the death of the farmer, otherwise it would not be available on lifetime transfers nor for the owner when land and farmhouse are tenanted.
4. (4) It is not necessary that there is any charge on the land available to support the ‘character appropriate’ test – APR may be available even if the taxpayer has no farmland.
5. (5) Consideration should be given to what agricultural land the farmhouse actually serves. It is appropriate to look at the situation on the ground to establish the faming unit – the farmhouse must serve a function in relation to the farming unit.
6. (6) Common occupation will not always constitute a sufficient nexus.

JUDGMENT MR JUSTICE WARREN JUDGE NICHOLAS ALEKSANDER Introduction [1] This is an appeal against a decision of the First-Tier Tribunal (John Walters QC and John Ritchie (the tribunal)) released on 31 January 2012 (the decision) concerning agricultural property relief from inheritance tax. The appellants (HMRC) were represented before us by Mr Jonathan Davey of counsel. …

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