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Why claiming inheritance tax relief is not simply horseplay

1st July, 2020

Agricultural property relief from Inheritance Tax has long been a valuable relief for estates, which when available can reduce the taxable value of agricultural land by 100%.

The question of what constitutes ‘agricultural property’ is a tricky one and particularly so where the land in question is used to keep horses.

The HMRC Inheritance Tax manual states that land used for the grazing of horses can qualify for relief provided there is a link with agricultural use. This may be the case where the horses are used as draught animals on a working farm or where the horses being grazed are declared to be part of the food chain under the horse passport scheme introduced in November 2003.

The grazing of horses used purely for leisure pursuits will not constitute occupation of the land for agricultural purposes although it can be argued that the primary activity is the growing of grass which can be properly regarded as a ‘crop’. HMRC may accept that the grazing is a secondary activity if they are satisfied that the use of the horses for leisure is not the primary use of the land.

Stud farms can qualify for relief provided the activity being undertaken is classed as the breeding and rearing of horses and the grazing of horses in connection with those activities. It is important that a genuine business activity is being undertaken and HMRC will want to see breeding carried on in a systematic manner with proper record keeping and business accounts for 5 years up to the date of death. Where the requirements are met, any buildings involved in the stud farming activities will also obtain relief.

Where agricultural relief is not available, it is important to consider whether business property relief could be claimed instead. Riding schools could fall into this category as could horse tourism activities such as the use of horses for trekking and riding holidays.

Equine inheritance tax planning is complex and it is crucial that landowners obtain proper professional advice in good time to ensure that these valuable reliefs from Inheritance Tax are available.

For further advice regarding inheritance tax relief, please contact James Wallace

James Wallace

Wills, Trusts and Tax

Partner
Email: [email protected]
Tel: 01244 405 588

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