Welcome

1. Welcome

2. 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

3. Banking after the Big Bang A banker’s perspective David Fowler Regional Agricultural Manager Devon

4. LIBOR v BASE RATE 2008

5. LIBOR v BASE RATE 2009

6. Banking after the Big Bang • 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!

7. Banking after the Big Bang Securing finance – be well prepared • Carefully prepared business plan • Accurate budgets & cash flows – sensitivity /stress test • Up to date Audited accounts • Security

8. Lending to Agriculture

9. We are here to help David FowlerRegional Agricultural ManagerDevon 01392 424871 07802 655897

10. Gross Domestic Product

11. Inheritance Tax Mary Jane Campbell

12. Inheritance Tax (IHT) Fact or Fiction?Farmers don’t pay IHT

13. 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

14. 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.

15. FACT Availability of BPR subject to strict criteria including • Ownership periods • Ownership arrangements for assets

16. 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.

17. Fiction Farmers don’t pay IHT Fiction unless you work at the facts.

18. 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.

19. 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

20. 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

21. Farmhouses Is it a farmhouse? Tests • Centre of operations • Sufficient business activity and involvement • Character appropriate Valuation issues

22. Inheritance Tax Succession/retirement plans Wills Partnership agreements Tax planning To ensure wealth protection and security of income for all involved

24. Kivells Rural Professional Department Mark Bunt BSc MRICS FAAV 07879 640970 mbunt@kivells.com Rural Professional Department www.kivells.com

25. Rural Professional Department “How to stay farming by use of appropriate agreements” Holsworthy Golf Club Wednesday 11th November 2009 www.kivells.com

26. Rural Professional Department • 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

27. Rural Professional Department • Inheritance Tax • Value of estate immediately before death • 40% • £325,000 • Agricultural Property Relief (APR) • Business Property Relief (BPR) www.kivells.com

28. Rural Professional Department • 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

29. Rural Professional Department • 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

30. Rural Professional Department • 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

31. Rural Professional Department • Case Law • Antrobus 1 - 2002 • Higginson - 2002 • Rosser 1 - 2003 • Antrobus 2 – 2005 • McKenna – 2006 • McClean - 2008 www.kivells.com

32. Rural Professional Department • 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

33. Rural Professional Department • 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

34. Rural Professional Department • 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

35. Rural Professional Department 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 • Contract Farming www.kivells.com

36. Rural Professional Department • 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

37. Rural Professional Department • Conclusions • Correctly drafted agreements – not “sham” agreements • Goal Posts continue to move • Be aware / Take advice • Avoid a tax liability www.kivells.com

38. Furnished Holiday Lettings Mary Jane Campbell

39. Furnished Holiday Lettings 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.”

40. FHL rules apply if: Furnished Holiday Lettings • Let on a commercial basis • Available for letting for 20 weeks • Let for 10 weeks • Restriction to prevent continuous occupation for more than 5 months

41. Tax results of applying FHL rules Furnished Holiday Lettings • Activity is defined as a trade • Capital allowances are available • Trading loss relief apply • Rollover, holdover & entrepreneurs’ relief all available for Capital Gains Tax.

42. 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

43. 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

44. 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

45. Questions….

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