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