What, a Relief?

Growing houses continues to be more attractive to many farmers and landowners than growing crops, this despite a reported decline in the value of development land, particularly for larger developments, writes Andrew Winearls

Although onerous Section 102 levies may apply, the Capital Gains Tax regime remains gentle. However, it should not be assumed that tax reliefs will automatically be available. Legislation imposes qualifying conditions and to ignore these is to invite a greater tax liability than need be incurred.

Entrepreneur’s Relief can only be claimed on the sale of land in conjunction with the disposal of an interest in a business. It is not available for any disposal of a business asset. Getting tax planning in place can pay dividends. A disposal can be in favour of a wife or other family member and can be of as little as a 5% holding in a trading company or a 5% interest in a partnership. Such a disposal opens the possibility for a claim for Entrepreneurs’ Relief in respect of an associated disposal of a business asset. This would be an asset owned by the shareholder or partner and used by the company or partnership business. Payment of rent can prejudice a claim and time limits have to be observed but the reward for getting things right is a 10% rate of tax. A detailed review, well in advance of a possible disposal, could be well worthwhile. The qualifying conditions are complex but it is possible that adjustments could be made which may secure the relief and therefore considerably lower the tax charge.

For a Sole Trader, the disposal of an interest in the business may be by transferring the trade to a Limited Company. The letting of land would not qualify as a business for this purpose so taking land back in hand and farming it directly or using a contractor may be an option to open up the possibility of a lower tax charge.

The conditions for Rollover Relief tend to be more straightforward and centre on timing, qualifying assets and amounts reinvested. Once again, leased land would not qualify.

Capital gains tax at 20% on development land profits for higher rate taxpayers is, in historical terms, generous. To be able to halve that rate by planning the sale so that Entrepreneurs’ Relief can be obtained or deferring the tax, possibly indefinitely, by claiming Rollover Relief is just the icing on the cake.

Information on which this article is based is correct at the time of publishing. Any updates are available on our website whitingandpartners.co.uk

Whiting & Partners offers core accounting services with specialist expertise in:

• Agriculture • Construction • Contractors • Manufacturing • Property • Retail • Road Haulage • Technology

Bury St Edmunds Office Greenwood House, Skyliner Way, Bury St. Edmunds, Suffolk. IP32 7GY Telephone: 01284 752313 bury@whitingandpartners.co.uk

whitingandpartners.co.uk