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
8.00 p.m.
Simpkins Edwards – Mary Jane Campbell
Furnished Holiday Lets
8.15 p.m.
8.30 p.m.
Questions
Light Refreshments
Lloyds TSB Agriculture
Banking after the Big Bang
A banker’s perspective
David Fowler
Regional Agricultural Manager
Devon
DATE
31/12/2008
17/12/2008
03/12/2008
19/11/2008
05/11/2008
22/10/2008
08/10/2008
24/09/2008
10/09/2008
27/08/2008
13/08/2008
30/07/2008
16/07/2008
02/07/2008
18/06/2008
04/06/2008
21/05/2008
07/05/2008
23/04/2008
09/04/2008
26/03/2008
12/03/2008
27/02/2008
13/02/2008
30/01/2008
16/01/2008
%
02/01/2008
LIBOR v BASE RATE 2008
LIBOR V BASE RATE
6.7
6.5
6.3
6.1
5.9
5.7
5.5
5.3
5.1
4.9
4.7
4.5
4.3
4.1
3.9
3.7
3.5
3.3
3.1
2.9
2.7
2.5
2.3
2.1
1.9
Base rate
1 month LIBOR
3 month LIBOR
6 month LIBOR
12 month LIBOR
0.77%
DATE
30/12/2009
16/12/2009
02/12/2009
18/11/2009
04/11/2009
21/10/2009
07/10/2009
23/09/2009
09/09/2009
26/08/2009
12/08/2009
29/07/2009
15/07/2009
01/07/2009
17/06/2009
03/06/2009
3.10
20/05/2009
06/05/2009
22/04/2009
08/04/2009
25/03/2009
11/03/2009
25/02/2009
11/02/2009
28/01/2009
14/01/2009
31/12/2008
LIBOR v BASE RATE 2009
LIBOR V BASE RATE
2.90
2.70
2.50
2.30
2.10
Base Rate
1.90
1 month LIBOR
% 1.70
1.50
3 month LIBOR
1.30
6 month LIBOR
1.10
12 month
LIBOR
0.90
0.70
0.50
0.30
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!
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
Lending to Agriculture
We are here to help
David Fowler
Regional Agricultural Manager
Devon
01392 424871
07802 655897
Gross Domestic Product
Inheritance Tax
Mary Jane Campbell
Inheritance Tax (IHT)
Fact or Fiction?
Farmers don’t pay IHT
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
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.
FACT
Availability of BPR subject to strict criteria
including
 Ownership periods
 Ownership arrangements for assets
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.
Fiction
Farmers don’t pay IHT
Fiction unless you work at the facts.
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.
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
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
Farmhouses
Is it a farmhouse?
Tests
• Centre of operations
• Sufficient business activity and
involvement
• Character appropriate
Valuation issues
Inheritance Tax
Succession/retirement plans
Wills
Partnership agreements
Tax planning
To ensure wealth protection and security of
income for all involved
Rural Professional Department
Rural Professional Department
Kivells Rural Professional Department
Mark Bunt BSc MRICS FAAV
07879 640970
mbunt@kivells.com
www.kivells.com
Rural Professional Department
Rural Professional Department
“How to stay farming by use of
appropriate agreements”
Holsworthy Golf Club
Wednesday 11th November 2009
www.kivells.com
Rural Professional Department
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
Rural Professional Department
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
Rural Professional Department
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
Rural Professional Department
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
Rural Professional Department
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
Rural Professional Department
Rural Professional Department
Case Law
• Antrobus 1 - 2002
• Higginson - 2002
• Rosser 1 - 2003
• Antrobus 2 – 2005
• McKenna – 2006
• McClean - 2008
www.kivells.com
Rural Professional Department
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
Rural Professional Department
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
Rural Professional Department
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
Rural Professional Department
Rural Professional Department
Contract Farming
•
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
www.kivells.com
Rural Professional Department
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
Rural Professional Department
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
Furnished Holiday
Lettings
Mary Jane Campbell
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.”
Furnished Holiday Lettings
FHL rules apply if:
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
Furnished Holiday Lettings
Tax results of applying FHL rules




Activity is defined as a trade
Capital allowances are available
Trading loss relief apply
Rollover, holdover & entrepreneurs’ relief
all available for Capital Gains Tax.
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
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
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
Questions….
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