Lease Or Licence? HMRC Is Not Taking A Lenient View
It has come to our attention that HMRC is taking a very close look at grazing licences and Profit à Prendre agreements in the context of claims for APR.
In a number of cases, the District Valuer (DV) has determined that land used for grazing by a third party, ostensibly under a grazing licence, is not occupied by the landowner for agricultural purposes. This assessment has led to a number of claims for APR being rejected, not only on the land in question but also the farmhouse (in circumstances where most of the land has been either let or licensed to others).
What is a grazing licence?
A grazing licence allows a third party to graze their animals for a short period (traditionally they were used from April to October). It does not confer any rights over the land and you, as the landowner, remain in occupation. This means that you can continue to claim BPS on the land as well as retaining certain tax advantages (for instance a grazing fee counts as trade rather than investment income, allowing you to set more costs against a grazing fee than you can against rent).
What is Profit à Prendre?
Less common than a grazing agreement, it allows someone to take something (in this case, grass by either mowing or grazing) from another's land. You, as the landowner, retain occupancy of the land but, in return for a fee, you allow another person to graze their livestock on what is essentially your crop of grass. Similar principles to grazing licences apply although there are more obligations on the landlord to ensure that the crop of grass remains in good condition.
Occupation for agricultural purposes
Whether or not you have granted a grazing licence or Profit à Prendre it is crucial that you document the agreement, ideally in writing (although verbal agreements are legally acceptable, written agreements are less open to misinterpretation). You must be able to prove that you, as the landowner, remain in occupation for agricultural purposes but, as far as the DV is concerned, this...
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