Make hay while the sun shines. But the challenge to Agricultural Property Relief (APR) for Inheritance Tax purposes from hay-making for horse hay prompts a number of other questions about when farming is considered to be agriculture by HMRC and when it is something else.

Never has this been more the case as farmers are now on the cliff-edge of farming for food or farming for the environment, for nature and the public interest as the direction of the next subsidy system appears to be heading.

In the Vigne vs HMRC case in 2017, even though the taxpayer was successful regarding Business Property Relief (BPR), it was noted that a claim for APR would have failed because no grass crop had been taken for two years; notwithstanding that it would have been used for the livery yard and therefore APR would have been denied in any case. Where then does that leave meadows planted for bees? Or field margins planted for farmland birds? Or plots planted with seed mix for skylarks?

Hay alone poses several questions. Where hay is cut and sold or kept for consumption by livestock that definitely constitutes an agricultural activity and APR is protected. But where it is sold or used for horses, if they are horses that are not kept for agriculture purposes or breeding and rearing as on a stud farm, then APR is wide open to challenge by HMRC.

Alison Robinson, partner, Saffery Champness and a member of the firm’s Landed Estates and Rural Business Group said: “Availability of APR is fraught with anomalies. For example, we have detail in the HMRC guidance showing that short rotation coppice will qualify, but a question mark is left over other bio-energy crops. Relief is available for tree nurseries as well as seeds and plants for flowers and food crops, but it is not clear whether it would be for turf. It is definitely not available in the case of other stock such as reared pheasants, or for grouse moors even though these may be used for seasonal hill grazing.

“So, if the future plan for subsidies is to move more land out of food production and into delivering for the natural environment, where does this leave APR? Breach of the rules is serious and could result in possible loss of APR on the associated farmhouse, as well as other penalties.

“This is as ever a complex area and, where there is any doubt then professional advice should be sought.”