| News
Use Budget changes to
facilitate succession
planning
Farming families could use changes announced in last
week’s Budget to facilitate succession planning,
according to accountant Old Mill.
ne of the headline
announcements
was the abolition
of Stamp Duty
Land Tax (SDLT)
for certain first-
time buyers on property
purchases up to £300,000. “This is
a significant tax break for those
looking to buy their first home,”
says tax manager Victoria Paley.
“However, it is also a good
opportunity for farmers to pass on
property to next generation at a
reduced cost.”
As an example, a retired
farming couple may live in a
£300,000 bungalow on the farm,
which is now run by their daughter
and son-in-law. The couple –
concerned about how to fund their
retirement without being reliant on
the farm - own a rental property in
the village. This provides a modest
income of £400 per month, but
they would prefer to have more
substantial liquid funds available.
Their grandson has recently
returned from agricultural college
and is keen to work on the farm,
with a view to eventually
succeeding his parents.
“To release equity from the
house, the retired couple could
move into the village property and
sell the bungalow to their
grandson,” explains Miss Paley.
“Under the normal SDLT rules, this
would have incurred a charge of
£5,000, but the changes mean that
no SDLT should arise on this
transfer. In addition, as they have
always occupied the bungalow as
their main residence, Principal
Private Residence relief applies so
that no Capital Gains Tax liability is
payable.”
The benefit still applies where
the value of the property exceeds
£300,000, with anything over this
threshold incurring SDLT at a rate
of 5%, up to a cap of £500,000.
“These changes, effective from 22
November 2017, will generally
save first-time buyers up to £5,000
and ease the financial pressures of
O
www.farmingmonthly.co.uk
getting on the property ladder,”
says Miss Paley.
However, the tax break will not
apply where the value of the
property exceeds £500,000, or if it
will not be occupied as the
purchaser’s main residence. “In
these cases the normal SDLT rates
will apply.”
When it comes to Inheritance
Tax, there remain ongoing
rumours across the industry that
there could be significant changes
to Agricultural Property Relief
(APR) and Business Property
Relief (BPR) in the future, explains
Miss Paley.
“HMRC is concerned that these
reliefs are being exploited to
benefit wealthy landowners, and
has commissioned research to
better understand their motivations
and behaviours. Old Mill has
contributed to this research, a
summary of which has now been
published by the Government,”
she adds.
“It is encouraging that the
summary highlighted that the
reliefs are crucial and that without
them many farms would have to
be sold to pay the IHT liability. It
also noted that succession
planning is generally focused on
keeping the farm together to pass
it on to the next generation as a
viable farming business, with
reducing tax being a secondary
consideration.”
However, it’s clear that APR also
benefits individuals like wealthy
investors who have negligible
involvement with the farm itself,
and it is those situations that the
Government is seeking to target.
“So while this report is
encouraging, it is likely that HMRC
will continue to investigate
potential abuse of the reliefs and
consider future changes,” says
Miss Paley. “It’s therefore vital,
when planning succession, to
ensure that your case is entirely
compliant with the letter of the
law.”
December 2017 | Farming Monthly | 07