MFG Solicitors have announced that HM Revenue and Customs are now out of time to lodge an appeal against the Golding case. The Tribunal Report makes interesting reading, and it’s available on the internet (link below). The following comments are based on the tribunal report. This was the case of a farmhouse on a 16 acre smallholding near Lichfield. Despite the lack of extensive agricultural activity on the holding in the years before Mr Golding’s death, the First Tier Tax Tribunal agreed that the farmhouse was of an appropriate character to the holding, and therefore eligible for Agricultural Property Relief (APR). This means that the value of the house will be substantially free of Inheritance Tax as the relief in this case will be 100% of the property’s Agricultural Value.
Alan Neal, the lawyer who successfully led the case on behalf of Mr Golding’s executors, said “It’s no secret that the Revenue were anxious to win this case and the successful outcome has definitely torpedoed their endeavours to deny more farming families tax relief.”
The case will now be quoted widely in claims for Agricultural Property Relief, especially in cases involving small farms where the farmer had no other obvious source of income, for elderly farmers who were still continuing farming albeit on a much reduced scale and for smaller farmhouses. It probably won’t do much for the prospects of APR on grand ‘Gentleman’s Residences’ on small or large blocks of land, where the ‘farmer’ is demonstrably gainfully-employed elsewhere. The case also continues a worrying trend that seems to suggest the worse the condition of a house, the more likely it is to be viewed as a farmhouse by the members of the tax tribunal. See the earlier Antrobus case for similar comments by the Special Commissioner. In this case, the Tribunal report seems to lay emphasis on the poor state of repair of the farmhouse and buildings, and the need of serious repair to the roof. This leads the Tribunal to comment that, from the experts’ photographs, the dwelling would only be acceptable as a farmhouse, going on to say later in the report that a working farm is not expected to be finished to the so-called ‘higher’ standards of a domestic residence. This raises the worrying question of whether a house in tip-top condition is therefore less likely to be regarded as a farmhouse.
Does the case set a strong precedent as the lawyers claim? First Tier Tax Tribunal decisions do not set legal precedents, so future Tribunals are not bound to follow them. And future cases which do go through to the higher courts could therefore overturn the reasoning in a decision like this one.
Secondly, there is another curious element in the Golding case. A claim for Agricultural Property Relief on a farmhouse has a clear logical flow. First there must be Agricultural Land, to which farmhouses (and other buildings) must be ancillary and of character appropriate. There then remains the attribution of Agricultural Value to the Agricultural Property.
The argument in Golding was about whether the farmhouse was of character appropriate. It was not argued at the Tribunal as to whether the house was a farmhouse at all within the definitions and earlier decided cases under the Inheritance Tax Act. There was a last-minute attempt by HMRC to contest this point, and the Tribunal accepted that HMRC had already conceded it in much earlier correspondence. At the very last minute (sometime between 24 February and 1 March 2011), HMRC’s counsel tried to re-raise this question, but was understandably prevented by the Tribunal from doing so at that late stage in proceedings. The case report includes the observation that, if this case had been argued, the Tribunal would have determined that the house was indeed a farmhouse within the Inheritance Tax definition, although no specific evidence was taken on the issue.
So the Golding decision is likely to be helfpul to other claims for APR in similar circumstances, but it also seems that we may continue to see challenges to APR claims on the question of whether houses on farms qualify as farmhouses, in line with earlier cases like Rosser, and McKenna.