From In-Portal Developers Guide

Additionally there can be significant tax advantages in owning agricultural land or a hobby farm. Thebasic investor may have in mind acquiring an asset class that has historically been extended tax breaks, or looking at long-term planning to protect his assets from the ravages of Inheritance Tax (IHT) after death. Increasingly we see people looking to structure their portfolios to include assets that benefit from IHT relief, whether as business or agricultural. Agricultural property can in many cases benefit from 100% relief from IHT. Relief extends not only to the land itself, but also to certain buildings. Agricultural is a relatively wide definition and includes land, pasture and buildings used in the rearing of livestock. Thereby using the land to breed or rear sheep, cows, pigs etc, will generally mean the land qualifies for relief. Breeding and rearing horses on a stud farm also counts, but, crucially, simply stabling and keeping horses does not. This final category can often catch out the hobby farmer who wishes paddocks near the house to stable his or his children's horses. The farmhouse itself, whilst a building used in connection with the farming business, is often critically analysed by HMRC as to whether IHT relief is available. These can often be viewed as rather grand when compared with the tatty run-down farmhouses that are often attached to working farms. Relocated from a city environment, the lifestyle farmer's house is often renovated to a very high standard and may very well be valuable in its own right. HMRC may disallow relief on such elegant and finely restored farmhouses in its entirety, and recent case law has adopted that approach for a manor house that was not deemed to be the centre of operations of the farming enterprise. Alternatively part of the value only may qualify. As might be expected HMRC are experts in this area but there are some key factors that can assist to obtain that valuable relief from tax and it is essential to show that you, and the farmhouse, are intimately connected with the business of farming.