The Upper Tier Tax Tribunal has upheld HMRC’s appeal against the First Tier Tribunal’s decision in the case of Atkinson v HMRC. The case turned on whether or not a bungalow was occupied for the purposes of agriculture.
Mr Atkinson acquired Abbotsons Farm in 1957. It comprised 195 acres and included a farmhouse. In 1966 a bungalow was built on the farm. From then on Mr Atkinson lived in the bungalow. His son and daughter-in-law lived in the farmhouse. Mr Atkinson farmed in partnership initially with his son and daughter-in-law and subsequently with his grandson and daughter-in-law. Mr Atkinson granted the partnership a tenancy over the farm.
In 2002 Mr Atkinson became ill. After some time in hospital he moved to a care home where he stayed until his death in 2006. He returned to the bungalow from time to time and was involved with his daughter-in-law and grandson in discussions about the farm. His belongings remained in the bungalow which was not used by anyone else.
The Tribunal’s decision focused on whether the bungalow qualified for agricultural property relief as having been occupied for the purposes of agriculture. Because of the tenancy the bungalow had to have been occupied for the purposes of agriculture for the period of 7 years before Mr Atkinson’s death in order to qualify for relief.
The Tribunal was clear that there must be a connection between occupation and agricultural purposes for the relief to apply. It accepted that sometimes this connection might be tenuous. It referred to the fact that a cottage occupied by an agricultural worker would qualify for relief although no farming activities are carried on at the cottage and its only use is to provide accommodation for the employee.
It also accepted that the occupation might be interrupted temporarily, without loss of relief, if the occupier went on holiday or was in hospital.
The Tribunal contrasted the occupation of the cottage by a farm worker with a cottage let to someone having nothing to do with agriculture. It said that in order for the cottage to attract agricultural property relief there had to be an objective connection between the occupation of the cottage and the relevant agricultural activities.
They accepted that before Mr Atkinson moved to the care home the bungalow was occupied for the purposes of agriculture.
At the First Tier Tribunal emphasis had been placed on the strict legal position that the partnership, as the tenant, was in occupation of the bungalow. The Upper Tribunal did not accept this and felt that it was Mr Atkinson’s actual occupation that was relevant. Relief would have been available whilst Mr Atkinson resided in the bungalow in the same way as relief would have been available for a farm worker occupying a cottage on the farm. Once he had left, there had to be relevant connection between the use of the bungalow and the activities on the rest of the farm for the relief to apply.
In conclusion the Upper Tribunal said that the correct approach to such questions is to identify what does and what does not amount to a sufficient connection between the use and occupation of the property in question and the agricultural activities being carried on on the agricultural property; and to ask whether the facts give rise to a sufficient connection.
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