A LANDMARK tax case has been won by the taxpayer concerning the Inheritance Tax relief available on farmhouses, advises Simon Tapp of Somerset-based chartered accountants Moore Scarrott.

In the case, Joseph Hanson claimed agricultural property relief (APR) from inheritance tax on a farmhouse, which had been in his family for more than 100 years.

HMRC argued that, although both house and farmland were occupied by the farmer, the assets were under different ownership and as a result, APR would not be available on the House.

HMRC took the argument to court, where it was upheld that, as the farmhouse was occupied by a full time working farmer and of character appropriate to the land farmed, APR should continue to apply, regardless of the differing ownership between house and land.

MrTapp said: "This decision is a great result for family farms in similar situations and potentially opens the doors to claims from APR on farmhouses that may have previously been refused.

"However, no farmhouse will qualify for full APR unless it is occupied for the purpose of agriculture and is of character appropriate to the land farmed."

“HMRC may take this to a higher court, however if elderly parents decide to retire from farming and transfer land to other family members but not the farmhouse, by ensuring that the house is occupied and land farmed by the same people should enable it to qualify for APR in future."