Jeremy's Blog 26th January 2024: Agricultural Protection is for Agricultural Use

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 25th January 2024

It can be worth remembering in today’s rapidly changing circumstances and new environmental offers that, where law or taxation make special provisions for farming, their benefit can be limited to where farming is being done. They are not entitlements, but conditional. Where agricultural activity ceases, the benefit of those special provisions can be lost. The provisions are to assist those who are farmers, not those who might have been farmers.

Positive husbandry of the land and production offers a common underlying theme in showing that farming continues – even if “husbandry” is only mentioned in the Income Tax definition of farming. That idea of positive husbandry answers the often interacting tests of agricultural use and business purpose that are key to many of these protections.

These issues arose when diversification was explored and now again when some look at large scale environmental use of land, whether under public schemes or private agreements, for direct commercial opportunity or personal choice.

Agricultural Property Relief (APR) from Inheritance Tax has long made this point, testing whether the land was used for the purposes of agriculture in the last two or seven years before death. Even if the land remains agricultural land and pasture, failing that would exclude APR and affect whether a dwelling qualifies as a “farmhouse” for APR. This can be a challenge where farming simply lapsed as the farmer aged.

As often seen in grazing cases, there may be specific facts and arguments to show that the farmer continued in business and was still husbanding the land for agricultural purposes. Charnley is a recent example whether the Tribunal accepted the grazier’s evidence that the deceased had been “farming his land using my stock”.

While set-aside was accepted by HMRC as a function of arable farming within the then support regimes, the possibility of a whole farm being managed only under the Good Agricultural and Environmental Condition (GAEC) rules of the Single Payment was ruled not to be a trade for Income Tax purposes. As that shows, just being in an official agricultural assistance scheme does not make an action or land agricultural for tax or legal purposes.

Such issues also arise for agricultural tenancies. There is a more fundamental point than the current discussion of tenancy terms and landlord’s consent. Tenants have statutory protection for the commercial farming purposes of the legislation. Whether in England, Wales or Scotland, an AHA tenancy only comes under the protection of agricultural holdings law where the land meets the test that it is:

“used for agriculture which is so used for the purposes of a trade or business”. (s.1(4), 1986 Act with similar words at s.1(1) of the 1991 Act)

Fyffe v Esslemont showed how failing to meet that test would remove the protection of the Act as the operation of the tenant’s farming agreements meant that such farming as was happening was not in his business. The tenancy had become unprotected by his own actions.

Taking a whole holding out of agricultural use can also lead to a Certificate of Bad Husbandry:

• in England, the Tribunal in Cruse v Snook considered a 2 acre holding held by a much larger farming company. The holding had been wholly devoted under an environmental stewardship agreement to non-rotational ungrazed land and flowers for pollinators. The Tribunal concluded that the Certificate should be issued as, while the tenant had not abandoned the land, no part was being used for production and so the tenant was not fulfilling its responsibilities to farm in accordance with the rules of good husbandry.
• in Scotland, the Land Court came to the same view in Cambusmore Estate Trustees v Little, finding that an absence of production amounted, prima facie, to a breach of Rule 1 of the Rules of Good Husbandry obliging the occupier to maintain a reasonable standard of efficient production.

Whether for tenancies or for tax, the abandonment of positive husbandry by decision or inertia can have serious consequences. It may be that it can be shown to be part of a larger agricultural business strategy but this may be harder where positive husbandry ceases for longer periods and for all the land. Where it happens unwittingly, the surprise can be nasty and could have been avoided by continuing positive husbandry. In the end, farming reliefs are for farmers.