The Upper Tax Tribunal has allowed HM Revenue & Customs’ appeal in the case of HMRC v Executors of Atkinson as reported at the end of 2011 by Case Check.
The decision allows HMRC to refuse agricultural property relief on a farmhouse because the farmer had gone into a care home just before his death. The executors were unrepresented at the appeal because they could not afford to pay HMRC’s costs if they lost.
The farm was owned by the deceased and let to a farming partnership. The deceased was a partner in the farming partnership and lived in a bungalow situated on the farm until ill-health meant he had to move into a care home. The deceased still made occasional visits to the bungalow and his possessions remained in it until his death.
HMRC had refused the Executors’ claim for agricultural property relief because they were of the view that the bungalow was not occupied for the purpose of agriculture for the relevant period required by section 117 of IHTA (“Inheritance Tax Act 1984”). The First Tier Tribunal allowed the Executors’ appeal.
On the basis of the findings of fact the First Tier Tribunal concluded that, for the purposes of the IHTA, the partnership was in occupation of the bungalow up to the date of Mr Atkinson’s death and that such occupation “was for the purposes of agriculture in the relevant sense because the bungalow was still used to accommodate the diminishing requirements of the senior partner”.
Section 117 (b): “… section 116 above does not apply to any agricultural property unless –(a) It was occupied by the transferor for the purposes of agriculture throughout the period of two years with the death of the transferor, or(b) It was owned by him throughout the period of seven years ending with that date and was throughout that period occupied (by him or another) for the purposes of agriculture.”
Section 116 grants relief for agricultural property.
Note. There is no definition of the word “occupied” nor is any special given to the words “for the purposes of agriculture”.
The question for the Upper Tribunal was whether the First Tier Tribunal made an error of law when they arrived at a decision of fact which no tribunal properly directed could properly have reached.
The Upper Tribunal found that the First Tier Tribunal did make an error in law.
“Were the matter for us, we would have no hesitation in concluding that the partnership ceased to occupy the bungalow for the purposes of agriculture when Mr Atkinson moved to the care home with no reasonable prospect of ever returning home.”
“In our judgment, the [First Tier] Tribunal failed to apply the correct approach and ask the correct questions. The correct approach is to identify what does and what does not amount to a sufficient connection between the use and occupation of the property in questions (the bungalow in the present case) and the agricultural activities being carried on on the agricultural property (the farm in the present case); and to ask whether the facts give rise to a sufficient connection.”
“If the [First Tier] Tribunal had adopted such an approach it could not, in our judgment, have come to only one conclusion, namely that the bungalow was not immediately before Mr Atkinson’s death, occupied for the purposes of agriculture and had not been since, at latest, it had become apparent that he would never be able to return there to live. In particular neither the occasional attendance of Margaret [his daughter-in-law] and Gary [his grandson] at the bungalow to deal with post or frost, nor the fact that some of Mr Atkinson’s belongings and furniture remained at the bungalow, can be said to constitute occupation for the purposes of agriculture throughout the seven years prior to Mr Atkinson’s death.”