“Does Your Farmhouse Pass The Elephant Test?”


Probably a question that you wouldn’t normally associate with farmhouses, or indeed, farming, but it is relevant for Inheritance Tax (IHT). Most farmers are not concerned about IHT, believing that their farm will qualify for 100% Agricultural Property Relief (APR) and in many cases the farm is the most valuable asset in their estate.

Unfortunately over the last few years it has become increasingly difficult to get 100% APR on farmhouses. Whilst the law has not changed, it is being interpreted differently. In many cases 30% of the value of the farmhouse does not qualify for APR.

There have been many legal cases testing eligibility for APR including one which indicated that farmhouses should pass the ‘Elephant’ test. The presiding judge believed that you would know an elephant if you saw one and similarly you would recognise a genuine farmhouse.

It has been suggested, by a well-known land agent, that you can tell a lot about a farmhouse if there is an orphan lamb in the Aga. It is a working farmhouse if the lamb is by the oven; it probably is not a working farmhouse if the lamb is in the oven. Fortunately the courts have not yet suggested a ‘Lamb’ test!

The important point to note, which many farmhouse owners are not aware of, is that many farmhouses no longer fully qualify for APR. It is therefore a good time to review your estate planning as often there are ways to significantly reduce the IHT that your estate will suffer.

At Green & Co we provide an Inheritance Tax and Care Home Fee Review Service to help you decide how to organise your estate in the best way possible.

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