IHT business property relief

Readers will be aware that there has been considerable debate about the IHT implications for a landowner, of entering into grazing agreements with owners of livestock. Of course, an owner of grassland may simply let the land to a tenant under a normal agricultural tenancy agreement. Provided the landowner has owned the land for at least seven years, there should be little difficulty in obtaining the IHT agricultural property relief in respect of the land on the death of the owner. However, (contrary to para 24084 of the Agricultural Property Chapter of the IHT Manual – the interim guidance issued on 9 February 2009 is more helpful but has yet to be inserted fully into the Manual). It is relatively unusual for owners to enter into full scale, if short, tenancy agreements of grazing land. No doubt partly as a result of habits formed in the days of the Agricultural Holdings Acts, landowners tend to grant only licences to graziers. These were encouraged by the terms of the Agricultural Holdings Acts because the licencee would not enjoy security of tenure. This is not an issue that has arisen since August 1995, as a result of the Agricultural Tenancy Act 1995 enabling farm business tenancies to be granted without leading to security of tenure. However, many owners continue to grant licences, because they are aware that, if the correct arrangements are made and complied with, the landowner will be regarded as farming the land. This, of course, opens the door to reliefs not available to agricultural landlords, such as business property relief, the issue before the Court of Appeal in Northern Ireland in McCall v HMRC (2009) NICA 12.