A special commissioner decided that three buildings forming part of a deceased's estate, having regard to the terms of IHTA 1984, s. 115(2), were not agricultural property for which relief under s. 116 was available in that, although their occupation was in connection with the intensive rearing of livestock, that connection was not ancillary to the occupation of the agricultural land with which it was occupied.

Facts

The deceased died in 2001 when Wells Farm, covering about 7.41 acres, formed part of her estate. It consisted of four pieces of land: the'red land' which was about 0.51 acres consisting of a dwelling occupied by the deceased and its gardens; the'green land', about 0.32 acres which, prior to the deceased's death, was let to a neighbour for grazing horses; the'orange land', about 3.99 acres occupied by a neighbour at the time of the deceased's death for grazing stock (an area which it was agreed qualified for agricultural property relief at 100 per cent); the'blue land', 2.59 acres on which three broiler houses used for rearing birds were situated.

The deceased had farmed the whole area herself until about 2000 when the farm began to lose money. She had been advised by a business consultant to let the broiler houses and did so in April 2000 when the blue land was let to Summers Poultry Ltd ('SPL'). The blue land was occupied by SPL under the terms of the farm business tenancy agreement, dated 27 April 2000 made between the deceased and SPL at an annual rent of £6,150. Clause 1 of the agreement provided that the tenant should use the holding for agricultural purposes only unless the landlord's written consent had been obtained in advance for any non-agricultural use. The deceased's personal representative ('the appellant') appealed against a notice of determination that in relation to the deemed disposal on the death of the deceased, the only part of the farm which, having regard to the terms of IHTA 1984, s. 115(2), was agricultural property for which relief under s. 116 was available was the 3.99 acres of the orange land. It was implicit in the determination that the broiler houses used for the intensive rearing of poultry and the'blue land' on which they were sited did not constitute agricultural property for the purposes of s. 115(2). Agricultural property had been defined in s. 115(2) as agricultural land or pasture (Part 1) and included woodland and any building used in connection with the intensive rearing of livestock or fish if the woodland or building was occupied with agricultural land or pasture and the occupation was ancillary to that of the agricultural land or pasture (Part 2); and also included such cottages, farm buildings and farm houses, together with the land occupied with them, as were of a character appropriate to the property (Part 3) (Starke & Anor (Exors of Brown, dec'd v IR Commrs 1995] BTC 8,028).

The appellant contended that the broiler houses fell within Part 2 of the definition of agricultural land in 115. It was accepted that the buildings were used in connection with the intensive rearing of livestock. The prequestions were therefore what land the buildings were occupied with, and whether their occupation was ancillary to the occupation of that land. The appellant said it was clear that the broiler houses were occupied with the blue land. Further he said they were also occupied with the orange land.

Issue

Whether the broiler houses were agricultural property so that they could benefit from the tax relief available under IHTA 1984, s. 116.

Decision

The special commissioner (Charles Hellier) (dismissing the appeal) said that it was clear from the decision in Starke that the broiler houses could not fall within Part 1 of the definition of agricultural property. As regards Part 2, there was no definition of'occupation' IHTA 1984, and no authority had been shown on meaning in that context. However, there was no reason to suppose that the draftsman of s. 115 had in mind any different meaning of occupation from that developed in earlier case law. Accordingly, occupation' for the purposes of s. 115 was the state affairs which existed when a person: had physical possession of land when he actually used it for such purposes as he saw fit (subject to any requirement imposed upon him by any agreement relating to the land or restriction to which the land was subject); controlled the use of that land; had the power of excluding (by trespass action) other persons from the benefit he enjoyed in the land; and had some form of right to some enjoyment of the land. In the present case, SPL was the occupier of the blue land and the deceased was not the occupier of that land. The only land occupied with the buildings for the purposes of Part 2 of the definition was the blue land. Therefore the question was whether the occupation of the broiler houses was ancillary to the occupation of the blue land. Section 115(2) was intended to provide that intensive buildings might qualify for relief if they were used as part of a farm. The primary meaning of ancillary' involved the provision of a service or support and implied that the ancillary matter was less important or subsidiary to the matter to which it was ancillary. The physical possession of the buildings had be ancillary to the physical possession of the other land. That required the purpose for which the buildings were actually used to be ancillary to the purpose for which the other land was actually used. In the context of intensive buildings, ancillary physical possession would exist where the purpose for which the buildings were used was a smaller part of the purpose of a larger farming enterprise conducted on the other land, as well as where the purpose for which the intensive buildings were used merely served the other land.

Section 117 imposed alternative additional preconditions for the granting of relief, namely that the agricultural property either be 'occupied by the transferor for the purposes of agriculture' for two years, or owned for seven years, but 'occupied (by him or another) for the purposes of agriculture' for that seven-year period. Those words indicated the same link in the draftsman's mind between'occupation' and'purpose' in relation to the meaning ancillary occupation. They also made clear in the context of that part of the Act that the use of an intensive building for its purpose of factory farming was an agricultural purpose: otherwise the inclusion in Part 2 of intensive buildings would be otiose. Accordingly, in the context of the Act, in the context s. 115(2) as a whole, and in the context of Part 2 itself, the requirements in Part 2 were satisfied if the woodland or intensive building was used for purposes which either served or assisted the purposes for which other land was occupied, or which formed an'add-on' or a smaller (subsidiary or subordinate) part of the overall agricultural purposes for which the other land was also occupied; and that latter requirement was satisfied even if the woodlands or intensive buildings were occupied for a free-standing purpose, so long as that purpose did not dominate the overall purposes of use of the land and was a subsidiary part of the purpose of an overall agricultural activity carried out the land occupied by one person. In the determination of whether or not woodland or buildings were occupied for a purpose which formed a subsidiary or subordinate part of the purpose for which land was occupied, the extent of the physical activities undertaken and in some circumstances the turnover generated by those activities would be relevant, but rarely would the area occupied be a significant factor. the present case, the broiler houses were occupied SPL together with the blue land. The purpose for which the broiler houses were used did not serve to help or assist the purposes of the occupation of any of blue land other than that on which they were situated, and the legislation did not permit the conclusion that the broiler houses served the land on which they were built. Thus the broiler houses would qualify only if they were occupied as an'add-on' to or a subsidiary part of the purposes of a larger agricultural enterprise carried out on the other land with which they were occupied. The purposes for the occupation of the remainder of the blue land did not enable that condition to be satisfied because the use of broiler houses dominated the use of the blue land. There was no evidence that SPL conducted a wider agricultural enterprise on other land it occupied. Accordingly, the broiler houses did not qualify as agricultural land within Part 2.

The appearance, situation and use of the broiler houses to the conclusion that they were properly described farm buildings. They would therefore fall within Part 3 if they were of a character appropriate to'the property'. That property, the special commissioners held in Rosser v IR Commrs (2003) Sp C 368 was other agricultural land in the ownership of the deceased. On that basis it included the whole of the acres of agricultural land at Wells Farm. The broiler houses occupied ten per cent of that area 0.68 acres). They dominated the blue land and were a significant feature of the view from the orange land. In those circumstances, the buildings were not of a character appropriate to the other agricultural property.

(2005) Sp C 500. Decision released 26 August 2005.