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Welcome. 7.00 p.m.Lloyds TSB Agriculture – David Fowler Banking after the Big Bang 7.20 p.m.Simpkins Edwards – Mary Jane Campbell Agricultural & Business Property Reliefs – are you up to date? 7.40 p.m.Kivells – Mark Bunt How to stay farming by use of appropriate agreement

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Welcome l.jpg

Welcome


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7.00 p.m.Lloyds TSB Agriculture – David Fowler

Banking after the Big Bang

7.20 p.m.Simpkins Edwards – Mary Jane Campbell

Agricultural & Business Property Reliefs – are you up to date?

7.40 p.m.Kivells – Mark Bunt

How to stay farming by use of appropriate agreement

8.00 p.m.Simpkins Edwards – Mary Jane Campbell

Furnished Holiday Lets

8.15 p.m.Questions

8.30 p.m.Light Refreshments


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Banking after the Big Bang A banker’s perspective

David Fowler

Regional Agricultural Manager

Devon


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LIBOR v BASE RATE 2008


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LIBOR v BASE RATE 2009


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Banking after the Big Bang

  • Has our lending policy changed? – No

  • Are we lending new funds? – Yes

  • Have we met are commitment to lend an extra 15% - Yes

  • Has the cost of borrowing increased? – Yes

  • Are all banks the same? – NO!


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Banking after the Big Bang

Securing finance – be well prepared

  • Carefully prepared business plan

  • Accurate budgets & cash flows – sensitivity /stress test

  • Up to date Audited accounts

  • Security


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Lending to Agriculture


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We are here to help

David FowlerRegional Agricultural ManagerDevon

01392 424871

07802 655897


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Gross Domestic Product


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Inheritance Tax

Mary Jane Campbell


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Inheritance Tax (IHT)

Fact or Fiction?Farmers don’t pay IHT


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FACT

100% / 50% Agricultural Property Relief (APR) available on the agricultural value of agricultural property

Areas of difficulty:

  • Assessment of agricultural value

  • Existence of land & buildings no longer used for farming

  • Farmhouse


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FACT

100% / 50% Business Property Relief (BPR) available on assets used in business.

  • Aim in tax planning for farmers is for BPR to cover assets not already covered by APR.


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FACT

Availability of BPR subject to strict criteria including

  • Ownership periods

  • Ownership arrangements for assets


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FACT

Easy to slip up for entirely sensible commercial and personal reasons.

Take advice,

and then take it again

when there is a change of plan

- it will be cheaper in the long run.


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Fiction

Farmers don’t pay IHT

Fiction unless you work at the facts.


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BPR Recent Cases

Nelson Dance

Farmland with potential for residential development

  • Transferred it to a family trust

  • Subsequently ceased farming

  • Settlor died shortly afterwards

    HMRC chased the trust for IHT

    High court decided in favour of the trust.


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BPR Recent Cases

McCall

Owned land with development potential

Let land on annual grazing agreements

  • Deceased arranged maintenance of hedges/ditches etc

  • Grazier fertilised ground


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BPR Recent Cases

McCall

  • Judge decided the activity being undertaken was that of holding investment property.

  • Deceased did nothing to maximise the value of the grazing.

  • No BPR was available


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Farmhouses

Is it a farmhouse?

Tests

  • Centre of operations

  • Sufficient business activity and involvement

  • Character appropriate

    Valuation issues


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Inheritance Tax

Succession/retirement plans

Wills

Partnership agreements

Tax planning

To ensure wealth protection and security of income for all involved


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Kivells Rural Professional Department

Mark Bunt BSc MRICS FAAV

07879 [email protected]

Rural Professional Department

www.kivells.com


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Rural Professional Department

“How to stay farming by use of appropriate agreements”

Holsworthy Golf Club

Wednesday 11th November 2009

www.kivells.com


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Rural Professional Department

  • Why are we discussing this?

  • Huge public debt

  • Bankrupt Britain

  • Government in need of tax revenue

  • Pressure on HM Revenue and Customs to raise tax revenue through Inheritance Tax

www.kivells.com


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Rural Professional Department

  • Inheritance Tax

  • Value of estate immediately before death

  • 40%

  • £325,000

  • Agricultural Property Relief (APR)

  • Business Property Relief (BPR)

www.kivells.com


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Rural Professional Department

  • Agricultural Property Relief (APR)

  • 100% or 50% relief

  • Based on agricultural value of agricultural property

  • Land, woodlands, buildings, wildlife habitat schemes, farmhouses, cottages

  • “Agricultural Value” assumes perpetual covenant prohibiting any other use

www.kivells.com


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Rural Professional Department

  • Business Property Relief (BPR)

  • 100% or 50%

  • Applies to animals, stock, plant and machinery and shares in the business

  • Used to relive excess of “Market Value” over “Agricultural Value”

www.kivells.com


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Rural Professional Department

  • What are the pitfalls?

  • If you stop “farming”

  • Assets will fall into taxable estate

  • = 40% tax liability

  • Farm dwellings but also land

  • APR and BPR will not apply!

www.kivells.com


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Rural Professional Department

  • Case Law

  • Antrobus 1 - 2002

  • Higginson - 2002

  • Rosser 1 - 2003

  • Antrobus 2 – 2005

  • McKenna – 2006

  • McClean - 2008

www.kivells.com


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Rural Professional Department

  • How do I avoid this?

  • Keep HM Revenue and Customs onside

  • Take advice from accountant

  • Goal Posts continually moving

  • Use appropriate agreements

  • Take advice from your land agent

www.kivells.com


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Rural Professional Department

  • Grazing Arrangements

  • FBT or Grazing Licence likely to be OK if land only

  • 100% APR would apply

  • But if farmhouse or farm cottages to consider

  • Be very careful

  • Active Management of land from the house required

www.kivells.com


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Rural Professional Department

  • What is active management?

  • Day to day decision making

  • Single Farm Payment/ Environmental Stewardship

  • Practical Farming Activities

  • Evidence

  • Grazing Licence prepared by Land Agent

www.kivells.com


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Rural Professional Department

Usually arable land only

Farmer (owner of land)

Contractor – usually provides machinery, labour

No security of tenure

Simply a business relationship

Buisness control remains with the farmer

Again – active management form farmhouse

  • Contract Farming

www.kivells.com


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Rural Professional Department

  • What is active management?

  • Day to day decision making

  • Single Farm Payment/ Environmental Stewardship

  • Practical Farming Activities

  • Evidence

  • Agreement prepared by Land Agent

www.kivells.com


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Rural Professional Department

  • Conclusions

  • Correctly drafted agreements – not “sham” agreements

  • Goal Posts continue to move

  • Be aware / Take advice

  • Avoid a tax liability

www.kivells.com


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Furnished Holiday Lettings

Mary Jane Campbell


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Furnished Holiday Lettings

Budget Red Book

“Budget 2009 announces the repeal of the furnished holiday letting (FHL) rules from April 2010. Until the repeal takes effect the FHL rules will be extended to those qualifying furnished holiday lettings elsewhere in the EEA.”


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FHL rules apply if:

Furnished Holiday Lettings

  • Let on a commercial basis

  • Available for letting for 20 weeks

  • Let for 10 weeks

  • Restriction to prevent continuous occupation for more than 5 months


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Tax results of applying FHL rules

Furnished Holiday Lettings

  • Activity is defined as a trade

  • Capital allowances are available

  • Trading loss relief apply

  • Rollover, holdover & entrepreneurs’ relief all available for Capital Gains Tax.


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After 2010

Income Tax

  • The old question “is FHL a trade?”

  • Central issue “are the taxpayer’s activities sufficient enough to make her a trader and not a mere landowner who derived an income by exploiting her property” from 1982 case

  • Class 2 and Class 4 National Insurance

  • Registration as self employed


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After 2010

Capital Gains Tax reliefs if trading status

Inheritance Tax, Business Property Relief

  • Reliant on definition of whether or not the activity amounts to a business

  • HMRC will be looking at level and type of services provided


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Action Points

Make use of CGT reliefs before

5th April 2010

- sell to a 3rd party

- sell at undervalue/gift

- sell and roll over proceeds


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Questions….


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For a chance to win a bottle of champagne, please remember to hand in your feedback form.


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