APR or BPR on part of farmland used for wind and solar power generation

The deceased owned a third share in a mixed stock/arable farm comprising 150 acres. There is a solar farm on three acres producing (last year) £75,000 and a wind turbine producing (last year) £7,000. Both are leased to a third party. Does any member have experience of whether these qualify for APR and/or BPR?

Malcolm Sterratt
Foster Law

Neither the solar farm nor the wind turbine qualify as agricultural use of the land. It is sometimes suggested that if the land has dual use for grazing and solar energy then APR can be claimed but HMRC resist such claims.

The production of electricity is a trade and therefore land used in that connection can be eligible for BPR but often the way it is structured is that a third party conducts the trade and the land is leased to that party. In that case there is no BPR for the

One thing to look at is whether the land used for solar and wind energy forms part of one larger asset which is used mainly for the farm business. In that event the whole asset gets BPR and there is no room for treating part of it as an excepted asset. This follows from the decision in Ninth Marquess of Hertford v CIR. HMRC do not necessarily accept this but then in that case they should have appealed against the decision.

Malcolm Gunn

M B Gunn & Co Ltd

I agree with Malcolm to the extent that a business may be a mixed business and consist of both trading and investment activities. If the income from solar and wind electricity production is purely a rent then this would be an investment activity, but if the income were reported as that of income into the farming business and reported in the same accounts, whether sole trader, partnership or Ltd Co, then it is merely an activity of that business. If the majority of the activity is that of conducting the trade (over 50%) then the whole of the business should receive the relief for IHT. Activity is largely a time based measure as opposed to just share of turnover or profit, the business needs to be looked at in the round.
The issue might be if the 3 acres had been separated from the farmland and that say the land and the income from the energy production was held and reported by say a separate entity, Ltd Co, then that element would have to be tested separately and then it would depend on whether this was merely a rent albeit linked to the energy production or the landowner and entity were say an active partner in the energy producing entity as the whether this activity is tested stand alone for BR, is it trading or investment.

Bob Massey
Countrywide Tax and Trust Corp