If you’re relying on Agricultural Property Relief (APR), you’ll want to be certain your farm meets HMRC’s criteria — and that the evidence genuinely stacks up.

Our Director & Chartered Accountant, Adrian Mole, was recently invited onto Farming Britain to explain what APR really is, the common misconceptions around eligibility, and the practical steps farming families should consider when planning for the next generation.

Whether you own a smallholding, a working farm, or a diversified rural business, Adrian’s insights bring clarity to a relief that is often misunderstood but incredibly valuable.

To watch the full interview about APR with Adrian, click the link below:

Don't Lose APR! How to prove you're farming

What Is Required to Claim APR?

TV producer and Fieldsports Channel co-founder David Wright opened the interview by asking what boxes you need to tick to claim APR.

“Well, to claim on APR, it’s clearly got to be an agricultural holding”

Looking back at past tax test cases that have been lost, Adrian highlighted how the agricultural holding test has failed many times over the years. He referenced a well-known example involving an orchard with a roadside honesty box selling apples, which attempted to claim agricultural property status for relief purposes. Unsurprisingly, the claim didn’t qualify — but what was surprising, Adrian noted, was how far up the legal ladder the case progressed before being rejected.

“We have to establish an agricultural holding. There has to be an agricultural purpose behind the asset.”

Farmhouses: Location, Purpose, and Commercial Reality

Where Does the Asset Value Sit?

For smaller farms (often up to 100 acres), a disproportionate amount of value often sits in the farmhouse. That leads to one of the most frequent questions:

Is the property truly a farmhouse, or just a house on a farm?

Adrian highlighted several key distinctions:

• The more the farmhouse is actively used in farming operations, the stronger the APR claim.
• Examples of farming activity, like tending livestock or processing produce on-site, help demonstrate purpose.
• The farmhouse should “fit the character” of the farm — a large stately home on a small holding is less convincing than a farmhouse reflecting the day-to-day reality of farm life.

He also noted the value of diversified income streams, such as honey production or bottling orchard-grown apple juice, anchored back to the farmhouse. This strengthens the case for APR by demonstrating commercial use and practical farming activity, so long as the operations represent genuine activity.

Who Decides APR Eligibility?

“Initially when we’re talking about the agricultural property relief being claimed, it’s a decision for the executives to take when they make the inheritance tax return.”

Adrian explained the decision-making process clearly:

1. The executors must reasonably determine that the property qualifies when submitting an inheritance tax return.
2. HMRC may challenge the return, particularly as they are gradually increasing oversight post-COVID.
3. If challenged, HMRC can involve a district valuer (chartered surveyor) to assess the property.
4. In contentious cases, disputes may ultimately reach the judicial system — where some landmark APR rulings have occurred.

Profit, Inputs, and Farming Viability

The discussion then turned to whether a farm needs to generate profit to qualify for APR.

Adrian explained how:

• Profit is helpful to demonstrate the farm’s commercial viability.
• However, for new or small holdings, it’s expected that showing a plan for profit is often sufficient.
• Cash-generating activity is what matters, rather than accounting profits influenced by depreciation or capital allowances.

Adrian also spoke about hobby or subsistence farming, which is assessed under income tax rules rather than inheritance tax rules. These rules allow up to six years of losses before you lose the ability to claim income tax loss relief in year seven. However, there is an exception — the six-year limit can be extended if the farm is in a genuine building phase (such as establishing a flock or herd) and shows clear potential to become economically viable.

He explained that feeding your family from the holding or raising livestock for eventual sale can still support an APR claim, as long as there is a clear plan and a credible economic rationale behind the operation.

“It's helpful to have a plan to show a profit. In fact, probably essential to show a plan of having a profit, but it's not fatal if you haven't done in the more recent years.”

Adrian also acknowledged how recent years have challenged even historically profitable farms — from drought to loss of Single Farm Payment and rising feed prices — all of which affect short-term profitability.

Farming on Fewer Acres: When Is a Smallholding Still a Farm?

Would a property of less than 12 acres still constitute a farm?

According to Adrian, size alone is not the deciding factor. The key questions are:

• Is there genuine farming activity?

• Is there a realistic plan for commercial output, even if small?

“Provided there’s crops being grown or animal husbandry taking place, then yes, potentially that absolutely can count.”

Crops, livestock, or subsistence-level production can support an APR claim if they form part of a credible agricultural model.

Wright also raised the topic of subsistence farming and whether it can factor into an APR claim. Adrian explained that genuine subsistence farming can still qualify, provided it has purpose and the potential to be commercially viable — for example, if livestock or produce could realistically be taken to market rather than used solely for self-consumption.

“Provided you can demonstrate that's the plan - that it could be an economic model if one, rather than slaughtering for self-consumption, one actually took one's lambs to market - then absolutely, I don't see a problem with subsistence farming, in itself, of being denied APR.”

Will APR become More Complicated?

Adrian agreed that tax law is becoming increasingly complex and that many historic loopholes have been closed. However, he emphasised that:

• APR has not been abolished.

• Smaller holdings should not panic.

• The £1 million exemption remains an important buffer.

Good planning is key — but there’s no need for urgent action solely based on speculation.

Family Succession: A Delicate Balance

Succession planning is often the hardest part of APR.

Adrian noted the challenges when only one child is involved in the farm while others are not. Balancing fairness, continuation of the farm, and asset protection requires thoughtful planning.

APR can play a major role in preserving the farm for future generations — but only when succession is planned with clarity and care.

Advice for Smaller Holdings

Adrian reassured small farm owners that:

• APR remains available, although the rules are tighter than before.

• Husband-and-wife partnerships often benefit from significant combined reliefs.

• Many worries dissolve once the situation is properly assessed.

Quove Accounting: Supporting Farms Anywhere

Adrian closed the interview with a reminder that Quove Accounting supports farmers nationwide:

“We might be in Suffolk, but we’re happy to travel literally anywhere to meet clients and help them. Zoom has made the world a small place.”

Whether through virtual meetings or on-site visits, Quove helps farmers navigate APR, succession planning, and wider tax matters — ensuring relief is claimed properly and the future of the farm is protected. 

Farming Britain: Showing the British Countryside

To watch the full episode, follow the link to Farming Britain's Channel below:

Creative farming and creative accounting – Farming Britain, episode 10

Need Advice on APR?

If you’re unsure whether your farmhouse, land, or smallholding qualifies for APR, or if you need tailored financial or agricultural tax advice, Quove Accounting can help.

Contact Us Today

Proper planning now can save families stress, preserve assets, and protect the future of your farm.

Categories: Insights