Shropshire Farming Talk: The Agricultural Holdings Act 1986 - The principal source of livelihood test for tenancy succession
The principal source of livelihood test is one of the eligibility tests that has to be met by an applicant when applying for succession to an agricultural holdings act tenancy.
For an applicant to satisfy this test he must demonstrate that in the seven years ending with the date of death or retirement of the former tenant, his only or principal source of livelihood throughout a continuous period of not less than five years, or two or more discontinuous periods together amounting to not less than five years, has been derived from his agricultural work on the holding or an agricultural unit of which the subject holding forms part of.
There are a number of areas in which issues can arise within this test, namely the definition of agricultural work, the sources of funding, what constitutes the agricultural holding, an applicant’s entitlement to drawings, the relevant period and periods of educational training to name but a few.
There is an exception to the above rule for a widow of the former tenant contained within section 36 (4) of the 1986 Act.
Livelihood is not only measured in cash terms eg. monetary wages, but it will also include any benefits in kind which may include for example where the applicant has had the benefit of rent-free accommodation, services or expenses paid for by the farming business such as electricity, oil or insurance that would otherwise be ordinary living expenses for which the applicant is liable.
These benefits can all be taken into account if they have paid for in lieu of the applicants agricultural work on the holding. The test seeks to establish whether the applicant is economically dependent upon the holding.
The changes to succession law that came into force in September 2024 included the removal of the minimum age at which a retiring tenant could serve his retirement notice.
This has consequently enabled prospective applicants to now tactfully plan ahead to enable a submission to be made following a 5 -7 year financial period in which the accounting figures fall in favour of the principal source of livelihood test.
For further advice in relation to tenancy succession planning please contact our Oswestry office. owestry@dmpcuk.com
by Kathryn Williams, Davies Meade
