Making sure that activities count as farming / husbandry is important for many aspects of inheritance tax, or capital gains tax when associated with high land values.

A recent tax case gives useful reminders of what landowners need to do to make sure that income from grass keep falls within the definition of trading as a farmer. The case concerned a conacre agreement, which is particular to Northern Ireland but it revolved around establishing what activities count as husbandry.

In order to show you are actively farming (and not just renting out the land as a passive investor), you have to prove that you are occupying the land for the purpose of husbandry, by

  • Acting to keep the land in good condition
  • Acting to ensure the land remains productive and fertile

So there are two boxes to tick: occupying, and husbandry, and you need to be able to provide evidence to back up both claims.

Agreements between the owner and the grazier ideally give the landlord lairage and access rights, typically by being able to use the land occasionally for his own stock animals. This helps establish occupation rights – and remember that the agreements on paper should match the facts of what you actually do.

Showing that you (rather than the grazier) are farming your land is the other issue.

The legal decision highlighted that the landowner actively varied fertilisers and long term management of the pasture in response to the current condition of the grass crop – even though this grass was feeding his tenant’s stock. It showed active awareness of the land and its condition, and it showed that the farmer was taking steps to maximise his grass crop.

This is a useful reminder. Grass Keep agreements should show that the landowner holds full responsibility for fertilising the land – preferably clearly stating that the grazier is not allowed to spread fertiliser.

The landowner must also be responsible for seeding, for weed control and for soil balance, maintenance and testing. You would also be expected to maintain fences and drainage, and supply water. Meeting these costs will show you are looking after your land to ensure its long term productivity.

Annual accounts showing grass keep income and these important expenses are a crucial part of evidencing your farming activities over a period of time.

Phil Bevis has many years of experience in farming accounts. If you have any questions you would like to ask us about this or related matters please do call.