APR and farmworkers’ cottages

By Tolley in association with Julie Butler
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The following Trusts and Inheritance Tax guidance note by Tolley in association with Julie Butler provides comprehensive and up to date tax information covering:

  • APR and farmworkers’ cottages
  • Qualifying cottages
  • The rate of APR
  • Empty and derelict cottages
  • Cottages occupied by retired farm workers
  • Cottage letting
  • Furnished holiday let (FHL) cottages

Qualifying cottages

Farmworkers’ cottages qualify for APR if:

  • they are occupied together with agricultural land
  • for the purposes of agriculture
  • and are of a ‘character appropriate’ to the agricultural property

IHTA 1984, ss 115(2), 117

The tests are clearly satisfied if the cottages are occupied by employees working on the farm. It is generally accepted that the cottages must be situated on the land to which they are ancillary. The size and number of cottages must be appropriate to the farming enterprise. Relief should be available where a farmworker’s cottage is occupied by a business partner instead of an employee, provided it is suitably modest. HMRC will challenge a claim which is effectively a claim for a second farmhouse.

In contrast to farmhouses, where relief may be restricted to the ‘agricultural’ value, relief is available on the whole value of a farm cottage provided the occupier is solely employed in agriculture.

IHTA 1984, s 169(1)
The rate of APR

The rate of relief on farmworkers’ cottages is given by the rule applying to all agricultural property summarised in the following table:

More on APR planning: