Analysis
Mr Atkinson (D) bought his farm in 1957. The farmhouse was occupied by his son and daughter-in-law, and he lived in a separate bungalow on the farm. In 1996, after his son died, D entered into partnership with his daughter-in-law and grandson and the farm was leased to the partnership. There was no separate arrangement for the bungalow. The farming records were kept there and partnership meetings were often held there. In 2002, D fell ill and eventually moved into a care home. His things remained in the bungalow, which he visited from time to time, but he did not live there again. However, he continued to be involved in the farming partnership, talking things over with his daughter-in-law and grandson. He died in 2006.
HMRC refused his estate’s claim for Agricultural Property Relief (APR), stating that the bungalow had not been ‘occupied for the purposes of agriculture’ throughout the necessary period. The executors appealed to the Tax Tribunal who held that the farm as a whole was occupied by the farming partnership. Providing accommodation for someone involved in the work of the farm was a valid agricultural purpose. There was no doubt that D continued to be involved in the work of the farm. Although he was not in actual occupation of the bungalow, his things were still there and it remained set aside for his needs. They concluded that, for the purposes of the IHTA, the partnership was in occupation of the bungalow up to the date of D’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’. Accordingly, APR applied.
HMRC appealed on the grounds that the Tribunal erred in law and further, or alternatively, made a finding of fact that no person acting judicially and properly instructed as to the relevant law could have come to, in holding that the farming partnership, of which D was a member at all relevant times up to his death, occupied the property in question for the purposes of agriculture for the requisite period.
Held: Appeal allowed
Although it was not unhelpful to consider what amounted to occupation and to address separately whether the occupation was for the purposes of agriculture, the condition that had to be fulfilled in the present case was, in reality, a single condition, namely that the property must be occupied for the purposes of agriculture. Each limb of the condition (occupation and for the purposes of agriculture) informed the other. Whether a particular use of the property could be said to amount to occupation for the purposes of agriculture had to be answered by reference to the type of property concerned and the type of activities that were capable of amounting to use for the purposes of agriculture [12].
The partnership ceased to occupy the bungalow for the purposes of agriculture when D moved to the care home with no reasonable prospect of ever returning home [30].
The only reason given in the Tribunal’s decision as to why the bungalow was occupied by the partnership for the purposes of agriculture, when D actually lived there, was his use of the bungalow as a dwelling in connection with the agricultural purposes to which the Farm was put, ie that he was an active partner in the business. But once D had ceased to live there those factors could not be prayed in aid to establish the connection. After D’s move that need (for accommodation) no longer existed and the Tribunal did not address the requirement to find a connection (which would be a question of fact) between the needs accommodated at that stage and the farming business. Instead, using seductive language, they effectively equated the ‘needs’ of D as similar to the ‘needs’ that he had had when he was a partner living in the bungalow describing them as simply ‘diminishing needs’. It was possible that some need with the necessary connection could have been accommodated (such as the need for an office), but the findings of fact about the use actually made of the bungalow suggested strongly that there was no such use in fact [40, 41].
The Tribunal had failed to apply the correct approach and ask the correct questions. The correct approach was to identify what did and did not amount to a sufficient connection between the use and occupation of the property in question (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 gave rise to a sufficient connection. If such an approach had been adopted the tribunal could only have come to one conclusion, namely that the bungalow was not occupied for the purposes of agriculture immediately before D’s death and had not been since, at latest, it had become apparent that he would never be able to return there to live [43].
Judgment Decision The appeal of the appellants, the Commissioners for Her Majesty’s Revenue and Customs is allowed. Reasons Introduction [1] This is an appeal against a decision of the First-tier Tribunal (Sir Stephen Oliver QC and Roland Presho FCMA (the Tribunal)) concerning agricultural property relief from inheritance tax. The appellants (HMRC) were represented by Mr …Continue reading "HMRC v Atkinson & anr [2011] UTUK B26 (TCC)"