Inheritance tax rules behind livery businesses

It appears illogical that a field used for grazing cattle qualifies for Agricultural Property Relief (APR), whereas the same field used for grazing horses generally qualifies for no inheritance tax (IHT) relief at all (with the notable exception of stud farms). IHT may therefore be payable at 40% on horse paddocks.

Business Property Relief (BPR) can be valuable in terms of IHT relief in the case of livery yards. Part or full-service livery yards can be seen to be trading businesses which attract BPR, especially in cases where the livery operator provides substantial day to day care of the horses. DIY or grass livery businesses (grazing and stabling) however, are often deemed to be investment businesses and as such BPR is denied.

HMRC are therefore likely to consider the nature of the additional services supplied beyond that of a DIY livery which give it the character of a trading business.

This was tested in the case of a deceased livery yard owner, Maureen Vigne from Buckinghamshire, where her children successfully argued that Mrs Vigne ran a trading business and that BPR applied to the 30 acres of land and buildings. The following services were successfully argued:

• The livery operator provided worming products and administered them to the horses when the owners could not.
• Hay was provided. In DIY livery yards the horse owners would be expected to visit and feed their horses, whereas at Mrs Vigne’s livery yard, the staff did this job.
• Removal of manure. At most DIY livery yards the horse owners would be expected to poo pick and remove the manure themselves. In the above case, this was carried out by the livery staff.
• Finally, the yard staff carried out a daily check of the horse’s general health and reported to the horse owners where any issues required further attention, ie. a call to the vet.

It was also considered to be an important fact that a yard manager was employed who was qualified at a high level in equine management. This would not typically be a requirement of a DIY livery yard.

Every case is assessed individually and so it is important to keep records and evidence of trading activity if it is thought that inheritance tax may be payable on the death of the owner.