Enter Your E-mail

Matthew Hutton MA, CTA (fellow), AIIT, TEP highlights an important distinction between leases and licences in the context of Agricultural Property Relief for Inheritance Tax purposes. 

Context

The main distinction between leases (which confer exclusive possession on the lessee) and licences (which are a personal right to the licensee) is a familiar one. 

It is important in the context of Agricultural Property Relief (APR). If the landowner occupies his house only qua landlord and not qua farmer, he will get no relief. However, if he licenses the land, on the basis suggested below, he remains in occupation, the income he receives is trading income and subject to showing the house is a farmhouse and in satisfying the character appropriate test, he can obtain APR on the house.

The history and the problem

Many so-called grazing licences are not licences at all, because they grant exclusive possession and therefore become tenancies (Street v Mountford [1985] AC 809). Very often, a so-called ‘grazing licence’ will amount to a short farm business tenancy. 

It is very important to know whether the agreement amounts to a licence or to a tenancy. As a good example, there was expensive litigation over 17 acres in Devon where a grazier claimed a protected tenancy (Stone v Whitcombe [1981] 1 EGLR 3 (CA)). 

So, what to do?

In a simple case, the landowner would make a grass-keep agreement with the grazier under which the landowner would grow the crop and the grazier would put his animals on the land for a limited period of, say, six months or so and would then leave. 

Better, however, is the use of a profit à prendre, rather an old-style form of agreement under which a person is allowed to enter onto land to take, say, fruit or turf or indeed grass. It looks very much like an easement, although there are significant legal differences. It must be by deed. The CLA’s precedent is accepted by HMRC as not ceding occupation to the beneficiary of the agreement. The language might seem a bit ancient, but it is effective. 

The McCall litigation

The landowner granted grazing agreements which were not tenancies. While the landowner Mrs McClean remained in legal occupation and the graziers had a form of licence (called an ‘agistment’, peculiar to Northern Ireland), the Court of Appeal in Northern Ireland has confirmed recently that Mrs McClean had for BPR purposes a business of holding investments: she simply did not do enough work, whether personally or through her agent son-in-law. The end result was the loss of BPR claimed on £5.8 million of development value (McCall and another v HMRC [2009] NICA 12).  [Matthew has reviewed the McCall case itself in a previous article - see BPR: Did Conacre or Agistment Arrangements in Northern Ireland Attract Relief? - Ed.]

(Jeremy Heal of Howes Percival speaking at the Norwich STEP lecture on 25.3.09)

What is MTR?

MTR is a 90 minute monthly training course, held in London, Ipswich and Norwich – as well as a reference work. Each Issue records the most significant tax developments over a wide range of subjects (see below) during the previous month, containing 30 to 40 items. The aim is not necessarily to take the place of the journals, but rather to provide an easily digestible summary of them and, through the six-monthly Indexes, to build up, over the years, a useful reference work. 

The first aim, therefore, of MTR is to inform. The second and subsidiary aim is to provide a monthly forum for the discussion of issues that tend to come up in professional practice, largely, though not exclusively, prompted by specific items in MTR.

Who should come to MTR? Does it attract CPD?

MTR is designed not primarily for the person who spends 100% of his/her time on tax, but rather for the practitioner (whether private client or company/commercial) for whom tax issues form part of his/her practice. Attendance at MTR qualifies for 1.5 CPD hours for members of the Law Society, for 1.5 CPD points for accountants (if MTR is considered relevant to the delegate’s practice) and (subject to the individual’s self-certification) should also count towards training requirements for the CIOT. For STEP purposes, MTR qualifies for CPD in principle, on the grounds that at least 50% of the content is trust and estate related.  
 
What is the content of MTR?

The material is drawn from HMRC press releases, Tax Bulletins, VAT business briefs, case reports and articles in the professional press. Each item carries a reference as to source which can be followed up if necessary. 

The logic of the ordering of the 12 sections is as follows: first, Capital Taxation (viz 1. Capital Gains Tax, 2. Inheritance Tax and 3. Stamp Taxes). Second, Personal Tax (4. Personal Income Tax). Third, Business Related Matters (viz, 5. Business Tax, 6. Employment, 7. National Insurance and 8. VAT & Customs Duties). And fourth, Miscellaneous (viz 9. Compliance, 10. Administration, 11. European and International and 12. Residue). An annual binder is provided within the subscription cost.

Despite an inevitable element of selectivity, MTR aims to be catholic in its coverage – and this is reflected in the presentations where appropriate: there may well be NI, VAT or employment tax points of which the person advising mainly on estate planning (for example) should at least be aware. That said, the London sessions at least tend to focus, by majority request, on estate planning issues: it is possible that in future one of the sessions might be geared more to company/commercial matters. 

How is MTR circulated?

The Notes are emailed to each delegate in the week before the presentations (and thus can easily be circulated around the office), with a follow-up four or five pages of practical Points Arising during the various sessions (whether in London, Ipswich or Norwich).

When and where is MTR held?

The London meetings take place at the National Liberal Club, One Whitehall Place, London SW1, on either the first or second Tuesday of the month, generally in the David Lloyd George Room. There is a choice of four sessions: 9.00 - 10.30 (3 places available), 11.00 – 12.30 (6 places available), 1.00 – 2.30 (8 places available) and 4.00 – 5.30 (3 places available).

The Ipswich meetings take place generally on the first or second Wednesday of the month at the offices of Pretty’s solicitors 45 Elm Street, Ipswich 5.00 – 6.30pm (5 places available). 

The Norwich meetings take place at the Norfolk Club, Upper King Street, Norwich on the first or second Thursday of the month from 5.30 – 7.00pm (3 places available). 

Dates are fixed up to a year in advance and any one delegate from a firm can take up the firm’s place each month. Attendance is limited to no more than 30 delegates in London and 25 delegates in Ipswich and Norwich (to make for ease of round table discussion).  The cost in London is £60 plus VAT, and in Ipswich and Norwich £50 plus VAT (billed every six months in advance).

How do I find out more?

For further details, visit http://www.matthewhutton.co.uk/ on Conferences & Seminars and then Monthly Tax Review – or email Matthew on mhutton@paston.co.uk.

For those whose firms unable to make the monthly seminars but wishing to order MTR as 'Notes Only' (at £180 per annum for the 12 issues, invoiced six-monthly in advance), visit  our sister site, TaxBookShop.com:
Monthly Tax Review Notes