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Friday, July 11, 2025
Cumberland and Westmorland Herald
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Cumberland and Westmorland Herald
  • News
    Councils ask for planned mayoral election to be postponed

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    Leo Group owner completes epic cycling challenge for MND research

    Leo Group owner completes epic cycling challenge for MND research

    Support for Penrith Mountain Rescue Team after charity box stolen

    Support for Penrith Mountain Rescue Team after charity box stolen

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    Inspiring Penrith teacher Dawn Coates retires after 26 years

    Use it or lose it: Urgent appeal for people to get on the bus

    Use it or lose it: Urgent appeal for people to get on the bus

    Penrith’s Enterprise Hub plans start to take shape

    Penrith’s Enterprise Hub plans start to take shape

    Nurturing Eden school praised by Ofsted

    Nurturing Eden school praised by Ofsted

    Inflation and the impact on savings

    Inflation and the impact on savings

    Celebrating Alston’s heritage heroes

    Celebrating Alston’s heritage heroes

  • Sport
    Success for fighting squad

    Success for fighting squad

    Penrith skipper Nicky Burns calls on team to keep winning

    Penrith skipper Nicky Burns calls on team to keep winning

    £100,000 target for new changing rooms extension

    £100,000 target for new changing rooms extension

    Medal success for Upper Eden tug-of-war team

    Medal success for Upper Eden tug-of-war team

    Eden man competes in Hyrox World Games

    Eden man competes in Hyrox World Games

    Double national triumph for Stuart Robinson

    Double national triumph for Stuart Robinson

    Patterdale’s Eden Eagles make history

    Patterdale’s Eden Eagles make history

    Penrith teen crowned British vault champion

    Penrith teen crowned British vault champion

    Penrith gymnasts represent North of England in finals

    Penrith gymnasts represent North of England in finals

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Home Farm and Countryside
This article appears as part of a paid partnership with Armstrong Watson

Are you an active farmer?

By David Threlkeld, accounting partner, Armstrong Watson LLP

by CWH
10 August 2023
in Expert advice, Farm and Countryside
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David Threlkeld

Asking someone who has lived and worked on the same farm for most of their life whether they are a farmer can provoke a puzzled look.

However, where the farmer is now doing less work on a daily basis and a neighbour is grazing the land, HMRC may argue that you are no longer an active farmer.

There are tax issues that can arise if you are deemed to be renting out your land rather than farming it yourself. The first point to make is that it does not matter what an agreement is called — grass letting, grazing licence, contract farming, etc — it is what happens in practice that will determine the tax treatment.

In simple terms, everything hinges on who is deemed to be carrying out acts of husbandry. For example:

  • If the landowner fertilises the land, controls weeds, reseeds when necessary, etc then they should be classed as the farmer. In such cases, the grazier is merely allowed to bring his animals on to the land to eat the grass.
  • If the grazier is responsible for all the above tasks then they will be deemed to be the farmer. The landowner is not carrying out any acts of husbandry and the land will now be treated as an investment asset.
  • A further issue is whether the landowner is taking a commercial risk. If a farm has fixed income and minimal expenses, this looks like a rental business. Conversely, a business with variable income and expenses is more likely to be accepted as a trading business.

Tax issues to consider

  • It may be possible to pay a lower rate of Capital Gains Tax on a sale of land — 10 rather than 20 per cent — if it has been actively farmed. Likewise, the deferral of CGT by purchasing replacement land is only possible if the land has been actively farmed.
  • Agricultural land which is rented out can still qualify for 100 per cent Inheritance Tax exemption. However, in order for a farmhouse to qualify it is necessary that the person living in the house is a working farmer. This will be difficult to prove if the grazier is carrying out all the acts of husbandry.
  • For Income Tax purposes there are a number of disadvantages of being classed as a non-farmer. These include not being able to offset as many expenses, restrictions on the offset of losses, and the inability to claim farmers averaging.
  • For VAT purposes there is a distinction between the receipt of rent (normally exempt from VAT) and the provision of a grazing licence (zero-rated animal feedstuffs). This can not only mean that a rental business cannot claim back VAT on expenses but should not be VAT registered.

In every case, the circumstances will be different and so it is important to take specialist advice to ensure you are aware of the tax treatment for your business.

For more information and support please call 0808 1445575 or email help@armstrongwatson.co.uk

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