HM Revenue & Customs recently lost a First Tier Tax Tribunal appeal over a business property relief case involving the estate of Maureen Vigne who, until her death in May 2012, ran a Buckinghamshire-based business that consisted of approximately 30 acres of land on which livery services were provided.

Following her death, Maureen’s personal representatives claimed business property relief and agricultural property relief (APR), but, HMRC refused both claims on the basis that the company was mainly involved in letting land to horse owners. The assumption was that this made it a business which mainly consisted of holding investments. These businesses don’t qualify for the relief.

Although this challenge may have brought a bit more clarity to the issue, businesses comprising the provision of services and occupation of land form a good deal of the case law in relation to BPR to date. With the high level court ruling, unless there is a substantial degree of services provided constituting what the client values over and above occupation of the land, the business would be viewed as an investment.

The Judge disagreed with HMRC and ruled that the business was a genuine livery business which offered more than the mere right to occupy a particular parcel of land. It was the provision of extra services that differentiated it from a company that was largely just holding and renting out the land. They included:

• The provision of worming products for the horses and their administration;
• Providing horses with hay feed during the winter with a hay crop grown on the land; and
• Removing horse manure from the fields; and a daily health check of the horses.

The basis of the judgment is that, if it looks like a business, it is a business. The judgement adds to the examples of land-based businesses that have qualified for BPR. In the court’s view, an ‘objective observer’ would not have thought agricultural activities were taking place on the land and equine activities are not usually characterized as agricultural. Therefore, APR was found not to be due.

The decision brings some confidence to the owners of businesses that own land to operate and trade. However, for clients who use a managed BPR solution for IHT planning, what they want is simplicity when it comes to claiming the relief. The hurdle remains high for land-based businesses to pass HMRC assessment, and good managed BPR services typically avoid such businesses.