The need for income and advances in technology have seen many landowners finding new ways to exploit their asset. Examples include farmers diversifying into the provision of leisure activities (e.g. visiting farms) and to generate of renewable energy (solar, wind etc). These new ways to use the land can test the established definitions of land and may affect claims for tax reliefs such as rollover relief, agricultural and business property reliefs, entrepreneur’s relief, holdover relief and partition relief. So how should we interpret what is “land” used in new circumstances for the purposes of the tax rules?
Firstly, “land” is not generally defined in the tax legislation and so we have to look for the meaning of the word in terms of its common usage. The Oxford English Dictionary defines land as – “The part of the earth’s surface that is not covered by water” and “An area of ground, especially in terms of its ownership or use”; so a bit vague.
Secondly, there are also definitions of land in other statutes, as follows:
Section 205 of the Law of Property Act 1925 says: “Land includes land of any tenure, and mines and minerals, whether or not held apart from the surface, buildings or parts of buildings (whether the division is horizontal, vertical or made in any other way) and other corporeal hereditaments; also a manor, an advowson, and a rent and other incorporeal hereditaments, and an easement, right, privilege, or benefit in, over, or derived from land; and “mines and minerals” include any strata or seam of minerals or substances in or under any land, and powers of working and getting the same; and “manor” includes a lordship, and reputed manor or lordship; and “hereditament” means any real property which on an intestacy occurring before the commencement of this Act might have devolved upon an heir;”
Schedule 1 of the Interpretation Act 1978 says: “Land includes building and other structures, land covered with water, and any estate, interest, easement, servitude or right in or over land”.
In parliament, Hansard records a question raised on the Treasury Minister David Gauke in November 2013 about the HMRC guidance on “the tax status of agricultural land used for energy projects, including solar farms”. The answer from the Minister was somewhat guarded and so we are not much the wiser.
Further, there is some help with case law – TSB Bank PLC v Botham (1996) [Court of Appeal CA21] decided in relation to a residential property that the bath, toilet and bathroom and kitchen units were fittings. Curtains, carpets, lights, appliances (such as dishwashers and washing machines) were chattels. The judge set out indicators to be used when deciding on items, including whether or not the item could be removed without damaging fabric to the building, and whether or not it was free standing or set into the building.
So “real property” and “structures” can be included as land and the above may help us with deciding when tax reliefs can apply to expenditure on land or land improvements (e.g. structures). However, each case will be different and how will we be able to decide where new technologies and activities are involved? For instance, can we say that as solar panels that have to be fixed to the ground and connected to the grid they will count as part of the value of the land holding? You decide!
As with all such tax situations, advice should also be sought before proceeding. For further details, contact us.