Font Size

An Intelligent Businessman Still Exists


Julie Butler - Expert Author

Tax Articles
Submit Articles   Back to Articles

12 December 2013

There has been a current trend by HMRC Capital Taxes Office to classify businesses which have been treated as a trade. The trading results have been recorded on the trading pages of the Tax Return, Class 4 National Insurance has been applied and yet when the owner of that business dies there have been problems in claiming the business property relief (BPR).

It might seem that for many businesses retirement is a comfortable and warm option and therefore the test to BPR is not one that has to be considered. This is not the case with farming, alternative land use and the rural way of life but the question has been looked at quite seriously in Pawson (Nicolette Vivian Pawson (Deceased) v HMRC [2013] UKUT 050 (TC) and also in Zetland (Trustees of David Zetland Settlement v HMRC [2013] UKFTT 284 (TC).

Flawed Approach by HMRC

The HMRC approach seems flawed in that it looked at what is being provided and sees the provision of land and possibly buildings as the main supply with some services and therefore looks at the level of services, and from this approach it is very easy to argue that a business is not a trading business, it is the wrong side of the investment line. Examples of this are liveries, particularly DIY liveries, and holiday lettings. There is a lot more organisation with liveries and lettings, although they do have a common core in that an intelligent businessman would see this operation as a trading business and something that was always intended to achieve inheritance tax relief. However HMRC are pushing back the boundary and their prize would appear to be a very large potential tax take.

The average age of a farmer in the UK who still owns their own land is understood to be in their 70s or 80s. The value of farmland, potential development land and farm property has “rocketed” in recent years, and this appears an easy target for HMRC. The HMRC attacks are very comprehensive. They seem to be attacking so many different areas of agricultural property relief (APR) and BPR. Examples of potential problems are:

1)      A mixed estate that has too many investment properties which have greater income and value than the farming operation.

2)      Occupation of the farmhouse for the last few years where the farmer has “semi-retired” due to ill health.

3)      Redundant farm buildings and buildings full of “junk” that was not used in the trade.

4)      A farmhouse surrounded by let land so it is not actually occupied for agriculture.

The list is endless and HMRC are very keen to collect more tax through aggressive correspondence whilst ignoring the intelligent businessman. The argument has to be when looking at the investment line that an intelligent businessman still exists and still would look at so many of these occupations as a business for BPR.

Strong arguments must be presented and we must always remember to argue that an intelligent businessman still exists.

About the Author

Supplied by Julie Butler F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire, SO24 9BH.  Tel: 01962 735544.  Email:  Website:

Julie Butler F.C.A. is the author of Tax Planning for Farm and Land Diversification (Bloomsbury Professional), Equine Tax Planning ISBN: 0406966540, and Stanley: Taxation of Farmers and Landowners (LexisNexis).

Follow us @Scopulus_News

Article Published/Sorted/Amended on Scopulus 2014-06-06 09:06:37 in Tax Articles

All Articles

Copyright © 2004-2021 Scopulus Limited. All rights reserved.