FARMER status holds the key to unlocking IHT relief on farm assets.

There are exceptions - the agricultural value of farmland/buildings should secure Inheritance Tax (IHT) relief if the land/buildings have been owned for at least seven years before death and farmed by anyone (not necessarily the owner) throughout that period.

However, for a country house to satisfy the preliminary test for IHT relief as a farmhouse it must be occupied by a working farmer; for the value attributable to any development potential inherent in farmland and farm buildings to qualify for relief the land/buildings must be used by the owner for the purposes of their farming business. Cottages, buildings and other capital assets that are not occupied for agriculture can secure IHT relief butthey must be held within a business structure that is mainly farming.

Because it is so important, farmer status is closely policed by HMRC and their scrutiny is intensifying.

The battle lines with HMRC are most sharply drawn where landowners farm with or through third parties and especially via grazing agreements and contracting arrangements.

Please contact David Maddock on 0845-2091205 or e-mail david.maddock@ clarkewillmott.com