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.

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. Questions

8.30 p.m. Light Refreshments

Lloyds TSB Agriculture


A banker’s perspective

David FowlerRegional Agricultural ManagerDevon

LIBOR v BASE RATE 2008

LIBOR V BASE RATE

1.92.12.32.52.72.93.13.33.53.73.94.14.34.54.74.95.15.35.55.75.96.16.36.56.7

02/0

1/20

08

16/0

1/20

08

30/0

1/20

08

13/0

2/20

08

27/0

2/20

08

12/0

3/20

08

26/0

3/20

08

09/0

4/20

08

23/0

4/20

08

07/0

5/20

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21/0

5/20

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04/0

6/20

08

18/0

6/20

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02/0

7/20

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16/0

7/20

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30/0

7/20

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13/0

8/20

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27/0

8/20

08

10/0

9/20

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24/0

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08/1

0/20

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22/1

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05/1

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19/1

1/20

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03/1

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17/1

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31/1

2/20

08

DATE

%

Base rate

1 month LIBOR

3 month LIBOR

6 month LIBOR

12 month LIBOR

0.77%

LIBOR v BASE RATE 2009

LIBOR V BASE RATE

0.30

0.50

0.70

0.90

1.10

1.30

1.50

1.70

1.90

2.10

2.30

2.50

2.70

2.90

3.10

31/1

2/20

08

14/0

1/20

09

28/0

1/20

09

11/0

2/20

09

25/0

2/20

09

11/0

3/20

09

25/0

3/20

09

08/0

4/20

09

22/0

4/20

09

06/0

5/20

09

20/0

5/20

09

03/0

6/20

09

17/0

6/20

09

01/0

7/20

09

15/0

7/20

09

29/0

7/20

09

12/0

8/20

09

26/0

8/20

09

09/0

9/20

09

23/0

9/20

09

07/1

0/20

09

21/1

0/20

09

04/1

1/20

09

18/1

1/20

09

02/1

2/20

09

16/1

2/20

09

30/1

2/20

09

DATE

%

Base Rate

1 month LIBOR

3 month LIBOR

6 month LIBOR

12 monthLIBOR


• 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!


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 FowlerRegional Agricultural Manager

Devon

01392 424871

07802 655897

Gross Domestic Product

Inheritance Tax

Mary Jane Campbell

Fact or Fiction?

Farmers don’t pay IHT

Inheritance Tax (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.

Farmers don’t pay IHT

Fiction unless you work at the facts.

Fiction

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

www.kivells.com www.kivells.com


www.kivells.com

Mark Bunt BSc MRICS FAAV

07879 640970 [email protected]

Kivells Rural Professional Department


www.kivells.com


www.kivells.com

““How to stay farming by use of appropriate agreements”

Holsworthy Golf Club

Wednesday 11th November 2009


www.kivells.com


www.kivells.com

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


www.kivells.com

Inheritance Tax

• Value of estate immediately before death

• 40%

• £325,000

• Agricultural Property Relief (APR)

• Business Property Relief (BPR)


www.kivells.com


www.kivells.com

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


www.kivells.com

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


www.kivells.com

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


www.kivells.com

Case Law

• Antrobus 1 - 2002

• Higginson - 2002

• Rosser 1 - 2003

• Antrobus 2 – 2005

• McKenna – 2006

• McClean - 2008


www.kivells.com


www.kivells.com

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


www.kivells.com

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


www.kivells.com

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


www.kivells.com

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


www.kivells.com

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


www.kivells.com

Conclusions

• Correctly drafted agreements – not “sham” agreements

•Goal Posts continue to move

• Be aware / Take advice

• Avoid a tax liability

Furnished Holiday Lettings

Mary Jane Campbell


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.”

FHL rules apply if:

Let on a commercial basisAvailable for letting for 20 weeksLet for 10 weeksRestriction to prevent continuous

occupation for more than 5 months


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.

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.

Documents

agriculture slide

assets slide

available slide

fiction slide

involved slide

welcome slide

farming farmhouse slide

iht inheritance tax