A life interest trust was created in 1968. Over the years various sub-funds have been created. One of the sub-funds is in the Relevant Property regime. Another is a Transitional Serial Interest so is not subject to the Relevant Property regime.
There is a Ten Year Anniversary arising on the Relevant Property sub-fund in March next year. The RP sub-fund owns cottages some of which are occupied by agricultural workers. The RP sub-fund owns no agricultural land. The TSI sub-fund of the same trust (but not in the same IHT regime) owns the agricultural land.
The land and cottages are let to a farming company that uses the land (and 3 of the cottages) for agricultural purposes (subject to a lease created in 1968). The property has been owned by the trust since 1968.
My question is:
Can the RP sub-fund make a valid claim for APR on the cottages occupied by agricultural workers when the agricultural land (which is usually the first hurdle for claiming APR) is owned by a different sub-fund which is not itself in the Relevant Property regime?
I know for CGT purposes that a trust is treated as one whole body with sub-funds ignored (unless specifically elected to be treated separately). So can the trust consider all property owned (and so ignore the sub-funds demarcation) for IHT purposes or must I only consider the property which is held in the RP sub-fund in isolation? Does the fact that the RP fund owns no agricultural land mean that the cottages fail the second condition of being “of a character appropriate to the agricultural land”?