Q: A farmer cousin of mine in Yorkshire has made a healthy sum from unused land this summer by letting it out for grazing. I am now thinking about doing the same next year. Can you explain the best way to go about it?
A: You should look into it carefully before doing so because this is a complex area of agricultural law and going about it the wrong way could have very serious financial implications, including the loss of agricultural grants and single farm payments as well as affecting your inheritance tax planning arrangements.
The key is to ensure you have the correct kind of agreement in place with the grazier. Horses for example cause some difficulties because they are not generally classed as livestock. Furthermore grazing by most horses is not agricultural use for inheritance tax purposes. However there are suitable grazing agreements for horses and indeed suitable grazing agreements for other animals such as cattle and sheep. It is very likely therefore that grazing agreements will be negotiated rather than Farm Business Tenancies. The issues likely to be important are principally for capital taxation reasons; reliefs for capital gains tax will generally be available only if the Land Owner is occupying the property and similarly agricultural relief for inheritance tax purposes (on the basis of occupation) will be available if the agreement is appropriately structured and the Land Owner is prepared to do sufficient work to prove that he is indeed in occupation. A Farm Business Tenancy will not give any of these tax advantages. Before making any decision you should talk through your options with an experienced agricultural lawyer.
(Article published Sept 2017)