George Hay Chartered Accountants were one of the first accountancy firms in the country to obtain a licence to carry out non-contentious probate work. In our monthly column, we give you an insight into the process and provide an update on what is happening in the world of probate and estates.
It has been a busy month in the Probate department, and we are now acting for a record number of estates.
We were delighted to bring one estate to a close, which had been ongoing for over two years.
A client of the George Hay Accountancy Partnership died. For many years he had operated as a market gardener and, whilst this was not to any large extent, he did make a small profit.
When he died, his estate had to be valued for Inheritance Tax (IHT); the estate included a small amount of land and a farmhouse. This is where the fun started.
We had the farmhouse professionally valued. The family of the deceased, who was a single man, commented on the poor condition of the property which had not been modernised for over 60 years, and was in a bad state of repair.
At the risk of upsetting my farming clients, but for a very good tax reason, I described it to HMRC as “agricultural”.
We claimed 100% Agricultural Property Relief (APR) on the farmhouse, as it was used for an agricultural business, therefore exempting the property from IHT.
However, HMRC challenged us on two points:
- Did the business justify a farmhouse?
- Why had we claimed relief on the whole property?
It is only possible to obtain relief of the agricultural value of the property, i.e., on the assumption it can only be used for agricultural purposes. HMRC said that every property must have a difference in the two valuations.
Accompanying the enquiry was a request for numerous business documents, all purchase invoices and other records relating to the business.
Fortunately, our Probate Director Barry Jefferd is also our Agricultural Tax Partner (an advantage of using an accountant for Probate). Given the cost of providing all the documentation requested, he was able to give HMRC a short precis. of the business and requested a site meeting.
Initially, HMRC refused, but we held our ground and eventually a meeting was agreed. During the visit, Barry was able to demonstrate the use of the farmhouse for the business, and that even without any deemed agricultural restriction, the property would not have been worth much more.
He also quoted tax cases to HMRC regarding a farmer always being a farmer, and that the house had to be looked at in connection with the land farmed, not just owned (there was some rented land).
Finally, this month, after two years of arguing, HMRC agreed our original figures.
Barry Jefferd said, “Whilst it was pleasing to get a result, the delays in HMRC replying to our letters, and their insistence on arguing the facts was hugely disappointing. It was also annoying for the beneficiaries, as whilst we had made an interim distribution to them, we had to hold back £200,000 to cover the additional tax, should our claim have failed.”
We are delighted that the £200,000 has now gone to its rightful place – the beneficiaries.
To talk to one of our professionals in confidence about our probate and estate services, call 01480 426500, or to find out more about how we can support you estate and Inheritance Tax planning, visit www.ghprobate.co.uk.
Authored by Director of GH Probate Ltd., Barry Jefferd.
Our Probate service is provided through GH Probate Limited. GH Probate is the trading style of GH Probate Limited. Registered in England and Wales number 9630102. Registered Office: St George’s House, George Street, Huntingdon, Cambridgeshire PE29 3GH.
Authorised to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England & Wales.
