Pictured above: Alan Neal
The Judgement of the First-tier Tax Tribunal in the case of
Golding v Her Majesty's Revenue and Customs (HMRC) was handed down
last week. The case regarded an appeal against the determination
that the Golding residence was not Agricultural Property within the
context of the Inheritance Tax Act.
The case was conducted by Alan Neal of MFG Solicitors, whilst
Clive Beer of Savills acted as expert witness on behalf of the
taxpayers, the children and executors of the late Dennis Noel
Golding, who died on 4th March 2007. Both Mr Neal and Mr Beer were
involved in the first cases brought by HMRC in relation to
Agricultural Property Relief (APR) and Inheritance Tax; the
Antrobus cases.
Mr Golding had for more than 65 years farmed a smallholding of
just over 16 acres near Lichfield, in the earlier years
intensively, but latterly at a much lower level of activity. A lot
of the produce was for his own consumption, though he had continued
to make modest profits each year. On his death APR was claimed on
the farm to reduce the liability to Inheritance Tax on his estate.
The Revenue, whilst accepting the claim in respect of the land and
buildings, denied it in respect of the farmhouse, which was a small
three-bedroom house in a poor state of repair. The Revenue
argued that the farmhouse was not character appropriate for APR
purposes and issued a Notice of Determination that it did not
qualify as agricultural property for the purposes of APR.
There was a preliminary issue at the Tribunal Hearing since,
whilst the Revenue had in open correspondence agreed that the only
basis for their refusal of their relief was that the farmhouse was
not character appropriate, on the eve of the Hearing they sought to
argue a second ground, namely that the house itself did not qualify
as a farmhouse for APR in any event. The Tribunal did not allow the
Revenue to take this point so the case proceeded on the character
appropriate point only.
The Tribunal found in favour of the executors and made it clear
that they would have won on the farmhouse point too had that been
considered.
Had the Revenue been successful, it would have had a major
impact in narrowing the definition of character appropriate. The
thrust of their argument being that there was in essence a single
objective test based upon the financial viability of the farming
operation to sustain the house, one factor was their assertion that
APR would only be available if the house would continue after death
to be a working farmhouse.
Whilst in his judgement the Tribunal Judge raises issues in
relation to part of Mr Beer's expert evidence, at the end of the
day his expert evidence was preferred to that of the District
Valuer, Geoff Coster who acted as expert witness for the Revenue.
The important issues arising from the case are:
1. The assertion that the Antrobus principals for establishing
character appropriateness still hold good and that the test
is one of fact and degree taking into account a number of different
physical and other factors, and is not based simply on financial
viability.
2. The acknowledgement that as farmers grow older and their work
rate drops, reduced business turnover and profitability do not of
themselves mean that the farmhouse will cease to qualify for
APR.
3. The recognition that the lifestyle aspirations and
expectations of the working farmer are very different from others
and that the character appropriate test needs to be viewed through
the eyes and with an appreciation of the working farmer's approach
to life.
A victory for the Revenue would have meant that the character
appropriate test would have been subject to the vagaries of farming
profitability and would probably have meant that few farmhouses in
the country would qualify for APR in bad years. The case is
very important in confirming that the principles established by the
Antrobus cases are still very much alive.
The Revenue has until mid-July to lodge an appeal if they wish
to challenge the decision.