The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
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.
The rate of relief on farmworkers’ cottages is given by the rule applying to all agricultural property summarised in the following table:
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