Tax victory for rural businesses

Featuring John Endacott | 13th October, 2017

Rural businesses have received good news after a tribunal decision that they can now qualify for Inheritance Tax (IHT) relief.

After denials of the relief in several cases over the last five years, a livery stable has succeeded where others had failed.

IHT business property relief is one of the most contentious and highly litigated areas and, in the case of the late Maureen Vigne, savings on IHT ran to £125,000. The law denies the relief where the intention is to hold property as an investment.

The tribunal heard that livery may range from full livery, where the landowner runs the equine equivalent of a hotel and is responsible for the horse’s day-to-day welfare, to the other extreme, DIY or grass livery where the landowner provides grazing, a supply of water and nothing else. The former will be a business that qualifies, the latter is a property business that, standing alone, will be excluded from the relief.

The tribunal case centred on what customers expected from Mrs Vigne’s livery business in return for their money. This was more than the right to allow the horses to graze in the field. The owners of the horses expected the livery to take on quite a degree of responsibility including keeping the fields free from manure, ensuring the horses were in good health and organising follow-up services (vets, farriers etc) if necessary. If the livery’s business mainly consisted of holding investments, it is unlikely they would be willing to take on such responsibility.

John Endacott, Tax Advisers Partner at South West chartered accountants and business advisers PKF Francis Clark, said:

“PKF Francis Clark are specialists in this area. We already have other pending cases dependent on this decision and it is possible that relief may also be due where a lower level of livery is part of a larger hybrid business of farming and letting property.

“If you think that this decision could affect you then please get in touch and we will be delighted to provide expert advice.”

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