6 August 2018
If you own a livery business and grant horse owners license to occupy land as a do-it-yourself (DIY) livery, do not take it for granted that the business will qualify for Business Property Relief (BPR).
BPR should be available as long as you provide services in addition to the letting of land and buildings. However, HMRC have been trying to deny BPR on the trade of horse liveries where horse owners are granted licenses to occupy land as a DIY livery.
If you own a livery where an element of care is provided, for example, feeding, mucking out, putting out to graze etc., then trading status will apply to your business and BPR can be claimed. If your stables are rented out for DIY livery purposes, then your business operation is not trading income and so not eligible for BPR.
To ensure you qualify for BPR you will need to demonstrate that your business was carried out with a view to a profit and that it was conducted in a regular manner on sound commercial and recognisable business principles. It is vital that you maintain good accounting records to demonstrate your trading activity in order to give you the best possible chance of a successful claim for BPR. This will then enable you to reduce the amount of Inheritance Tax (IHT) payable on death or on lifetime gifts to trusts.
We can work with you to recommend a number of options to strengthen your case. For example, grazing agreements can be beneficial here, but if they are not carefully drafted, clarifying the services that are included and provided by your livery business including responsibility for fertilising the grass, maintaining the fences and hedges, emergency feeding and vet cover, security, provision of feedstuff and hay and general care, they may indicate investment rather than trading activity. The appropriate insurance policy will also assist with your evidence.
We recommend that you start to collate and retain your evidence now as, after death, the best witness, you the business owner, will be dead. A strong trading case for your livery business will also assist with any sideways loss relief claims for income tax purposes.
If you would like to discuss how our team could assist you, or for further advice on any other aspect of farming business planning, please speak to your usual UHY adviser.
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