Tax pitfalls with growing hay

KEY POINTS

• Talk of a green Brexit and wildflower meadows might encourage some farmers to begin or increase the cultivation of hay.
• Haymaking for horses might lead to an attack by HMRC as to inheritance tax relief.
• HMRC may argue that the sale is not an agricultural activity under IHTA 1984 s 115.
• Loss of relief may also have an adverse impact on relief for land and farmhouses.
• The influence of VAT treatment.
• Careful documentation of activities may be essential in preserving tax reliefs.

It might be thought that the treatment of hay for tax purposes is of minimal importance. However we should bear in mind environmental secretary Michael Gove’s encouragement 

of subsidies that ‘enhance the natural environment’ which could include cultivating wildflower...