When presented with a taxpayer who owns a farm, woodland or estate, the question we tend to pose to them is ‘what are your long-term ambitions’? As such, there can be a range of responses to the questions below, or a mixture of a few: –
- Is there potential to obtain planning on all or part of the site concerned?
- Is this an asset that you would intend future generations to take control over?
- Is the intention to hold the asset for the long term and reap annual returns?
- What inheritance tax relief is available as things stand? How might this be improved?
We are comfortable in advising clients who are faced with one or more of the conundrums posed above as there are several tax considerations. The tax position and specifically the CGT position, on the sale of a such an asset can be quite complex. In certain circumstances, any sale is exempt from CGT. The sale of the land itself, however, does not benefit from any such relief. It is also quite possible that any gain might qualify for, say, Entrepreneurs’ Relief or Holdover Relief where the asset is sold as one entity. If there is a sale of the land with a standing business then, for VAT purposes, this is an exempt supply. There are a number of potential IHT reliefs that might be in point. However, assessing which, if any apply, is not always straightforward. If the farm, woodlands or estate has been owned for a two-year period then a taxpayer might benefit from Business Property Relief or Agricultural Property Relief. A further feature of a farm, woodland or estate is that it would be generally suitable (merely from a tax perspective) for holding in a registered pension scheme. This means a taxpayer could hold in their SSAS or SIPP to plan for their retirement.