Tax relief implications for grazings clarified by First-Tier Tribunal case

In the light of recent reports of a call to end tax breaks in relation to owning farmland, there has been some clarification on grazings following a decision by the First-Tier Tribunal earlier this year, says Saffery Champness.

The Scottish accountancy firm said the developments help to differentiate between investment or trading activities by a landowner.

While the case in question, John Carlisle Allen, centred on a Conacre arrangement in Northern Ireland, it still has significance elsewhere in the UK, says Susie Swift, partner at Saffery Champness, and a member of the firm’s Landed Estates and Rural Business Group based in its Inverness office.

She explained: “In this case the grass was grown by Mr Allen, but grazed by the stock of a Mr Crooks.

“Conditions included Mr Allen’s continued use of the ground for lairage when he might require it, as well as maintaining drainage and fencing, supplying fertiliser and water, and having weeds and hedges cut by a contractor.

“The arrangement, for a licence fee rather than a rent, ran from 17 March to 1 November with the stock removed in the winter to prevent poaching of the ground. A number of other conditions were also attached to Mr Crooks’ use of the land.

“Allen was seen by the Tribunal to be trading as he managed the land, supplying fertiliser, deciding when stock could be on the ground, and ensuring that weeds were cut.

“Had Mr Crooks been allowed to spread his own fertiliser when he wished then the landowner would not have been seen as growing a grass crop.

“What is really important is a demonstration of husbandry - that the landowner has retained access rights to grow his grass, and to use the ground for lairage as appropriate.

“This case has relevance to a range of reliefs applicable to the rural sector including business property and agricultural property relief claims for inheritance tax, rollover relief for capital gains tax, and entrepreneur’s relief.”