In reality the introduction of a new £1m ‘entrepreneurs relief’ is only likely to benefit those farmers and landowners who are retiring or selling the business, as the relief is largely a replacement of retirement relief. 

For the disposal of farm business assets, from the 6th April the new flat rate of 18% CGT will take effect, with the loss of taper relief and indexation triggering a substantial increase in tax liability.  This could be particularly painful for those disposing of assets that have greatly increased in value since they were acquired like land or property which has since secured consent for development or land that was previously held in tenancy and is now available with vacant possession.

The loss of indexation will also significantly increase the tax bill of those disposing of agricultural land.  Under this current regime assets acquired before April 1998 still benefit from indexation, which working from March 1982 annually adjusted the base cost of the asset to reflect increases in the retail price index (RPI) reducing the overall gain to allow for inflation. 

So for example if you sold land now for £3,000 per acre which was originally acquired at £1,000 per acre you would benefit from indexation which increases the base price to £2,100 per acre at the 1998 reference point (the last point at which indexation was applied before ending).  You can then add in reasonable costs of say £100 per acre for the acquisition and £100 per acre for the disposal increasing the base price to £2,200 and reducing the sales price to £2,900 creating a taxable gain of only £700.  When you add in taper relief which effectively reduces your rate of tax to 10% for any assets held for two years or more you are left with a tax bill of £70 per acre.  If you sell after 6th April this will hike by up to five times as much as your land originally acquired at £1,000 per acre is sold for £3,000 per acre, even with the same costs of £200 removed, you face a taxable gain of £1,800 at the newer higher rate of 18% generating a tax bill of £324 per acre.

It is important that farmers who need to dispose of assets take action now; with little time remaining it will be critical to consider alternative vehicles or inter family transfer options.  For example a transfer now to a trusted family member at £3,000 would incur the £70 per acre bill, then the family member can sell the asset after 6th April and trigger a next to nil tax liability as the asset won’t have increased significantly in value.  However if the vehicle is clearly purely for tax reduction measures the revenue may pursue the individual with anti avoidance measures so transfers may need to include wider commercial objectives such as transferring now in order to sell in 18 months time at the end of a Farm Business Tenancy (FBT) for example.  There are certainly options open to farmers; however they need to seek professional advice as soon as possible.

For more information or advice please contact Sarah Webster on 01609 785715 or via email at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it