Tax payers would have been happy to read the decision of the First-tier Tribunal (FTT) which held that business property relief (BPR) was available on the late Mrs Vigne’s livery business.

BPR has the effect of exempting a business from the charge to inheritance tax. However, the legislation excludes the relief “if the business… consists wholly or mainly of one or more of […] land or buildings or making or holding investments.”

HMRC had denied the relief arguing that there were insufficient activities of a business nature, so the question asked throughout the case was “did the business consist mainly of holding investments?”

The FTT considered that intention of parliament was to exclude the relief for land “where the underlying intention is to hold it as an investment rather than as a component of and integral to some other business activity.”

 If the clear intention is to provide a service, with the land being a necessary element for the performance of the service, then BPR is more likely to apply.

What customers expected from Mrs Vigne’s livery business in return for their money 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 a responsibility.

Unfortunately, it is still possible that HMRC will appeal this decision. If not, it will be on the basis that the services provided were sufficiently extensive that they were nearer to a full livery than to a DIY livery.

Nevertheless, the point to take away from this case is that livery businesses and riding schools can qualify for BPR.

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 which is a grass livery where the landowner provides grazing, a supply of water and nothing else. The former will be a business that qualifies for BPR, the latter is a property business that, standing alone, will be excluded from the relief.

Relief might also be due where a DIY livery is part of a larger hybrid business of farming and letting property in which the letting does not predominate (see Farmer’s Executors v CIR [1999] SCD 321 and HMRC v A M Brander as Exec of the Will of the late fourth Earl of Balfour [2010] UKUT 300 (TCC)).

The factors considered in Farmer to determine which part of the business predominates, farming or letting, will need to be considered in every single case, and kept under review from year to year if agricultural and commercial property values, rental levels and the time spent managing the farm and the lettings fluctuate relative to each other.


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