November 10, 2025
Article
For any potential successor to an Agricultural Holdings Act (AHA) tenancy, understanding the livelihood test is key. The test is complex and commonly misunderstood, frequently resulting in applicants failing on technicalities that could have been avoided. It is important to seek advice early on to ensure that you understand the requirements, retain the required information and secure the best chance of a positive outcome.
To succeed to an AHA tenancy, an applicant must satisfy both the eligibility and suitability tests. The suitability tests are broad and cover everything from the applicant’s character to their financial standing (including a livelihood test), qualifications and training.
The eligibility test is broken into two parts: the close living relative test and the livelihood test. The former requires the applicant to be the outgoing tenant’s spouse, civil partner, child, sibling or person treated as the outgoing tenant’s child.
To satisfy the livelihood test, the applicant must prove that for at least five of the seven years preceding the outgoing tenant’s death, they derived their principal source of income from their agricultural work on the holding, or on an agricultural unit on which the holding forms a part. It is generally accepted that “principal” in this context means more than 50%.
Whilst this sounds reasonably straightforward, there are many pitfalls which result in this being quite a complex calculation.
Firstly, the applicant’s income, in this instance, is defined in terms of their livelihood expenditure, i.e. what they actually spent or consumed for the purpose of living their chosen lifestyle. This includes both monetary amounts and benefits in kind. The test aims to establish how much of their livelihood expenditure was funded by their agricultural work on the holding, or an agricultural unit on which the holding forms a part (qualifying income) and how much was funded by income from elsewhere (non-qualifying income).
To do this, in simple terms, the first step of the livelihood calculation is to determine the total income received and apportion this between qualifying, and non-qualifying sources. This apportionment is then applied to the livelihood expenditure to ascertain how much of the applicant’s livelihood expenditure is funded by agricultural work on the holding or an agricultural unit on which the holding forms a part.
Expenditure on items not deemed to be maintenance or sustenance, such as savings and investments, are excluded from the definition of livelihood expenditure. As such an important part of the livelihood calculation is to identify the source of any such expenditure and determine whether it came from qualifying or non-qualifying sources.
It must also be considered that work needs to be agricultural to be qualifying. For example, income generated from rental properties, even if located within the agricultural holding, will be deemed to be non-qualifying as this is not agricultural income. This could also apply to diversified businesses run from the holding, such as campsites, self-storage sites or cafes.
Conversely, agricultural work undertaken at a different location can be deemed to be qualifying if it can be proved that it is on an agricultural unit on which the holding forms a part. If this situation may apply to you then advice should be taken as to how this should be structured, to ensure that you have the best chance of this income being treated as qualifying income in any future livelihood calculation.
The other common misconception with regards to the livelihood calculation, is that it is only the income and expenditure of the applicant that is considered. This is incorrect; it is the income and expenditure of the whole household that is considered within the livelihood calculation. This can have a large impact on the outcome, especially if a member of the household has a substantial income from an external source.
Overall, the complexities of AHA tenancy successions mean that it is advisable to seek advice as early as is practicably possible. The period in question is the seven years preceding the outgoing tenant’s death, therefore thought needs to be given to this well in advance of the tenancy succession taking place. Retaining appropriate records, i.e. bank statements, for this period is also important and will help later with completing the calculation.
If you would like any further information, then please do contact Iain McVicar or Jenny Cotton.