Sussex Exclusive Magazine Issue 6 2023

In an interesting development, HM
Revenue and Customs (“HMRC”)
have extended Agricultural
Property Relief (“APR”) for
Inheritance Tax (“IHT”) to include
vineyards and wineries. Given the
success of the English wine industry, it
is welcome that the tax code has caught
up with the real world.
no longer the centre of operations for the
winery. The next generation may need to
occupy the house if they are continuing
the family winery business with the older
generation moving to a different and
perhaps smaller property on the vineyard
or elsewhere.
What are the APR dangers?
...when a wine
making business
transitions from
one generation
to the next,
there is a risk
the house
may, in fact,
have become
a retirement
home and
is no longer
the centre of
operations for
the winery.
But first, what is APR?
In summary, APR is the tax relief given
for IHT purposes on land occupied for
the purposes of agriculture, together
with related buildings and houses used
in conjunction with that land. There are
time ownership requirements: two years
for owner occupiers and seven years for
tenanted farmland.
There is then the rate of tax relief:
100% if the land is in-hand or let on
a Farm Business Tenancy or if vacant
possession can be obtained within two
years, and 50% in most other cases.
The tax legislation does not define
“agriculture” but it is normally taken
to include horticulture, fruit growing,
rearing of livestock or fish, together
with any woodlands ancillary to the
farming operation.
What has changed?
The guidance from HM Revenue
and Customs has been updated to
confirm horticulture, or in their words
“cultivation to produce food for human
and animal consumption” now includes
the clarification “’food’ in this context
would include, for example, grapes
grown to produce wine and apples grown
to produce cider”.
This is, of course, welcome given the
increasing acreage made over to wine
production in South East England.
With Sussex being the perfect location
to produce outstanding wine, it is no
wonder there are nearly 150 vineyards
in Sussex including a number of
well-known names such as Ridgeview,
Rathfinny, Bolney, Wiston, Tinwood
and Nyetimber.
So what does that all mean?
Whilst each of these businesses will
benefit from this clarification when
assets are gifted in lifetime, on the
passing of an individual or when put
into trust, more significantly this tax
relief contributes to the continuity
of the business as it passes from
one generation to the next and the
livelihoods of those involved.
Does APR include farm
buildings?
Farm buildings used as part of the
winery will qualify for APR. However
derelict farm buildings do not qualify
for APR as they are not being occupied
for the purposes of agriculture. This
may be particularly relevant if a farm
is transitioning from traditional
horticultural use to being a winery and
not all the farm buildings are used in
the wine making business.
And what about the owner’s
house?
The test for whether the owner’s house is
of “character appropriate to the property”
requires consideration of four factors:
• Is the house appropriate by reference
to its size, content and layout with the
winery buildings and the size of the
vineyard?
• Is the house proportionate in size
and nature to the requirements of the
winery?
• Would the educated rural layman
regard the house as the core of the
winery or just a large country house
with land purchased for lifestyle
reasons?
• How long has the house been
associated with the land and is there a
history of horticulture?
The winery owner’s house should
therefore qualify for APR if of a character
appropriate to the vineyard, provided
it is where the wine making business is
controlled from.
Also, when a wine making business
transitions from one generation to the
next, there is a risk the house may, in fact,
have become a retirement home and is
There are some. The most obvious in a
wine making business is APR will not be
available if there is a binding contract for
sale of the property in the partnership
or shareholders agreement, but this can
usually be avoided by having in place buy
and sell option agreements.
What if the farmland and
buildings have development
value?
APR is only given for the agricultural
value of the property as opposed to
the open market value of the property.
Sometimes these amounts are the
same but sometimes HMRC insist on
agricultural value being 60-70% of open
market value even though there is no such
standard discount. Each case will need to
be considered on its merits.
If, however, the land has hope or
development value, particularly if the
vineyard is next to a built up area or
could be the next strategic site in a local
authority approved plan, the excess value
over the agricultural value will not attract
APR. The position may however be saved
by Business Property Relief, another form
of tax relief for Inheritance Tax relief
purposes, if the land is used in the owner’s
own trading business.
Conclusion
Wineries can be very Inheritance Tax
efficient as well as providing a meaningful
and joyous lifestyle.
Stuart Ritchie
is a chartered
accountant and
chartered tax
adviser with over
30 years’ experience.
He is a tax partner
with Ritchie Philips
LLP based in
Horsham and can
be contacted on
020 3195 1300
or stuart.ritchie@
ritchiephillips.
co.uk
He has direct
experience of
securing CGT
exemption for
gardens sold for
development,
multiple buildings
qualifying as a
single dwelling
for CGT purposes
so that sale of
subservient
buildings are CGT
exempt, and the
sale of properties in
excess of 10 acres all
qualifying for CGT
exemption.
73