What Do Elephants and Farmhouses Have in Common?

09 May 2024

We originally published this post on the ‘Elephant Teston 23 September 2013 and updated it on 9 May 2024 for freshness, accuracy, and comprehensiveness.

“Does Your Farmhouse Pass The Elephant Test?”

Many farmers are not concerned with Inheritance Tax (IHT), believing that their farm will qualify for 100% Agricultural Property Relief (APR). However, in practice, it is always more complicated than this, particularly depending on whether their farmhouse passes ‘The Elephant test’.

Legal cases have defined our current understanding of farmhouse eligibility for APR. One such case highlighted the ‘Elephant’ test, a crucial factor in APR qualification. The presiding judge believed that you would know an elephant if you saw one, albeit you may struggle to describe it, and similarly, you would recognise a genuine farmhouse. 

“The Elephant Test” is one of the factors that HMRC considers when deciding on an APR claim on a farmhouse. Other important considerations are:

  • Does the farmhouse function as the central hub for managing the farm operations?
  • Is the farmhouse’s size and style appropriate (“character-appropriate”) for the surrounding farmland, following the “Elephant Test” principle?
  • Is there documented agricultural activity historically linking the farmhouse to the land it sits on?

The important point to note is that many farmhouse owners are unaware that many farmhouses do not fully qualify for APR. It is therefore important to review your estate planning, as often there are ways to significantly reduce the IHT that your estate will suffer.

At Green & Co, we understand the complexities of rural estate planning. Contact us today for a free consultation. We’ll help you navigate APR, ensuring a smooth transfer of your farm to future generations. Together, we can safeguard your legacy and financial security.

Author
Nick Park FCCA,Director
“Does Your Farmhouse Pass The Elephant Test

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