Farmers can benefit from several favourable tax reliefs for income tax, capital gains tax and inheritance tax purposes, but many of these can be denied if the business structure is incorrect. Jonathan Crowther lists 6 typical issues where problems can arise.
- The owners of the land may be different to who runs the farm for many reasons. This is known as “Hotch Potch” and can prevent Entrepreneurs Relief (ER) being claimed if the farm is sold and also Agricultural Property Relief (APR) on the death of the landowner.
- The sale of only part of the farmland may not qualify for ER if there is not a material associated disposal of the business or retirement.
- APR may be restricted or denied on a farmhouse if it is not the centre of the farming enterprise.
- Diversification into say rental or contracting businesses may affect farming reliefs as these activities may not be considered to be farming.
- Furnished holiday rules from 5 April 2011 will restrict Business Property Relief (BPR) unless service levels are expansive.
- Renewable energy schemes (solar and wind) whilst generating good financial returns will not qualify for ER, BPR or APR.
Farmers should review their business structure with their accountant or tax adviser. There are ways to avoid many of the pitfalls with careful planning.
For more information please contact:
Jonathan Crowther FCA or Sophie Howard ACA