SVM112170 - IHT Agricultural Property Relief: References to the Valuation Office Agency

Where AR has been claimed or is likely to be available, you should determine whether the conditions for relief are satisfied before you refer the papers to the Valuation Office Agency (VOA).

If the conditions for relief are satisfied, you should inform the VOA in your instructing memo. The VOA will then report in terms such as:

“The basis of valuation (item . . . . .) is appropriate for 100% [or 50%] relief.”

If the company’s main activity is clearly trading, so that BR will cover any part of the share value not qualifying for AR, you will not normally need to consult the VOA at all. However, you may still have to ask for the VOA’s opinion if it appears that any land or buildings owned by the company would qualify for neither relief.

Where BR is not available (often because of s.105 (3)), if it appears that the conditions for 100% AR are satisfied (for example, because the land is subject to a post-September 1995 agricultural tenancy) you should ask the VOA for his opinion of the open market and agricultural values of the property. However, if they are able to confirm that those two values are the same and that the basis of valuation is appropriate for 100% relief, their confirmation of those points is all that is required.

If the company owns agricultural property which on the face of it qualifies for relief at only 50% (where it is subject to a pre-1 September 1995 agricultural tenancy), you will need the VOA’s opinion of both the agricultural value and the open market value - since 50% relief will apply to the agricultural value and any excess of the open market value over that will qualify for no relief.

For further information see Chapter 24 of the Inheritance Tax manual at IHTM24160 onwards.

Agriculture

Under s.115 “agriculture” may be taken to include

  • the breeding and rearing of horses on a stud farm

and

  • the grazing of horses in connection with those activities.

When instructing the VOA in such a case you should

  • indicate that agricultural relief has been claimed for what is described as a stud farm

and

  • request the VOA to confirm that the property was in fact used as a stud farm.

Refer any case to the Litigation and Technical Advice Team (LTAT) where the VOA disputes that the activity amounts to the existence of a stud farm.

Milk Quotas

The aim of the Milk Quota (MQ) system, introduced on 2 April 1984, was to limit the supply of milk within the European Union. MQ may be described as a producer’s right to sell a fixed number of litres of milk a year without having to pay a levy and was allocated to producers by reference to the land used by them. In this context the term ‘producer’ embraces

  • an individual
  • a partnership
  • a company farming as freeholder or under a tenancy or licence.

MQ ended on 31 March 2015. However, for historic valuation dates the value of MQ might still be significant and in those cases needs to be included as an asset of an estate or one of the assets of a dairy farming company, partnership or sole business.

Where an owner used his land for a dairy farm, you should value MQ as part of the land and allow agricultural relief on the full combined value if the land itself qualifies for relief. Business relief is likely to be available in the alternative so the precise nature of the relief and its apportionment is not relevant.

The position is different where the property in the deceased’s/transferor’s estate was the freehold interest in land subject to a tenancy. In this situation, if the tenant had a dairy farm with MQ, it is likely that the existence of the quota will be reflected in the value of the freehold interest in the land. Subject to the other conditions for relief being satisfied, you may allow agricultural relief on the value of the freehold interest as enhanced by the existence of MQ.

MQ was not strictly tied to land. It could be the subject of an agreement to transfer quota permanently from one producer to another either with, or without, land. Following the European Court of Justice’s Decision in 2002 in the Thomsen case non-producing ex-dairy farmers were not permitted to lease out MQ. Where MQ reverted to a non-producing landlord at the end of a tenancy it will be necessary for the non-producing landlord to prove either that he resumed milk production himself or the MQ was transferred to another producer at the earliest opportunity.

The valuation of MQ is normally undertaken by the VOA.

The valuation of MQ is normally undertaken by the VOA although it will rarely be necessary to value Milk Quota as the system ended on 31 March 2015. If you do see a case where a valuation might be required ask LTAT for advice on

  • any queries to be raised

and

  • the procedure to be followed on reference to the VOA.

For further information see Chapter 24 of the Inheritance Tax manual at IHTM24250 and IHTM24251.

Other questions

If the replacement provisions for either the company occupation/ownership or the share ownership tests are in point, particulars of the replaced property and of the agricultural value at the time of its replacement should also be obtained before reference to the VOA is made.

Additional Guidance: SVM150000