The new tax year is coming, the political scene is about to get a spring cleaning and the reform of the support system in agriculture will change the way farming businesses operate. There are many questions to be answered and all businesses need to consider how they can best take advantage of the changes which are about to take place.
Getting our house in order is sometimes easier said than done but now is the time to be gathering the information. There are those issues which recur on an annual basis like budgeting and tax returns, what do you need to do? Have you got an advisor? Remember that in just over a month, as the evenings lengthen, the grass will start growing again and the cycle begins again.
Let us focus on buying and selling. If you are a buyer, what expertise do you need? If you are looking for an agricultural or forestry holding, retaining an experienced rural property consultant, even if you feel capable of undertaking this yourself, will enable you to make an informed offer.
A professional assessment of the asset to be purchased can make the difference between a good investment and a pup. Furthermore, you will get access to off-market property which otherwise may get missed.
As a seller, at the most basic level, there are a multitude of issues we can do ourselves like making sure the property is in a fit state to be viewed – are the drains running, do any drinkers need repair, are the fences fit for purpose? Small things like this can add immeasurably to the value by altering the perception a potential buyer has of the property.
At a higher level, the seller must be aware of the taxation issues which will arise as a result of the sale. In this area, a professional advisor is essential.
An accountant will be able to give advice on the actual detail of the tax calculation, be it Inheritance Tax (IHT), Capital Gains Tax (CGT) or Stamp Duty Land Tax but often the tax needs to be viewed on a strategic level and once again this is an area where a rural property consultant will be able to help.
We all know tax evasion is illegal and will steer well clear of this, however, there is an ever narrowing line between tax avoidance and tax planning or mitigation. Tax avoidance is not illegal but it is manipulating the system in a manner not intended by government or the taxman. Tax planning and mitigation is the intentional reduction of liabilities through measures HMRC (and the press) will not pursue.
Making sense of all this is difficult and, once again, can make the difference between a good investment and a poor one. Let’s take woodland as an example, income from forestry is income tax and corporation tax free, it is also entirely free of CGT, however, on sale the value of the land on which the trees stand is taxable but can be off-set by capital costs such as the construction of roads.
If you have sold property and now have a potential CGT liability, a forestry investment can be an excellent tax planning measure as well as a way of building an asset which will be free of any form of capital tax. Remember too that after 2 years your investment is eligible for Business Property Relief at 100% making it free of IHT as well. As they say, a no-brainer if you have assets you want to preserve.
This is where the experts become invaluable. Bruton Knowles now has a considerable presence in the West Country with offices in Bristol, Taunton and Plymouth and can advise at a strategic level on any rural property queries you may have.