Increase your income in the agricultural property market
The legal procedures in buying, leasing or disposing of agricultural land are similar to those employed when dealing with any other freehold or leasehold land. The difference comes when making property searches and enquiries, which must be tailored to the agricultural or rural scenario to include references to English Heritage and the Sites of Specific Scientific Interest legislation and of course, particular attention must be paid to the transfer of “entitlements” under the single farm payment scheme (SFP), not to mention any other grants or subsidies associated with the land, where the land is to be retained for farming purposes.
Any good agricultural agent will verify that the introduction of the SFP has provided owners and occupiers of agricultural land the flexibility to decide which party claims the various grants and which party farms the land and this is a welcome progression.
However, traditional uses of agricultural land are being challenged and landowners are rethinking their options.
What with mad cow disease, “bird flu”, last year’s blue tongue outbreak, foot & mouth disease and bovine tuberculosis, farming people are becoming increasingly aware of the options available (and potential profit to be made) in breaking out of the traditional constraints of farming their agricultural land. Certainly, we are taking more instructions from owners (and tenants) of agricultural land and estates, looking to diversify - whether in relation to maximising business advancement by branching out into new commercial enterprises, or just with regards to letting opportunities.
With the appropriate planning consents, many farmers and land owners have converted redundant farm buildings, including barns and storage facilities, to provide holiday or commercial and business lets, with considerable success. We have known of children’s nurseries; small office developments; posh farm shops; units for storage & warehousing; and riding schools, to name but a few schemes.
Such side schemes undoubtedly provide a welcome income stream, supplemental to that generated by the traditional farm business. It should be remembered however, that while buildings are left empty between lettings and waiting for the right tenant to turn up, the landlord will be liable for business rates on empty premises. The Chancellor's decision in November 2008 to help small businesses through the current financial crisis with a one-year exemption on empty business property rates is helping. This means that properties with a rateable value of £15,000 or less, are temporarily exempt from empty property tax for the 2009-10 financial year. For more guidance on this particular area, please consult the Guidance Note prepared by the Country Land & Business Association (CLA), entitled “Empty Property Business Rates”.
In any event, anyone embarking on such diversification plans would be best advised to first seek specialist inheritance tax planning guidance and advice on obtaining any agricultural property reliefs.
Inheritance tax is currently levied at 40% on that part of the value of the estate which exceeds £325,000. It is the market value of assets which is particularly relevant here - property values may be enhanced where traditional farm buildings have been converted to provide commercial accommodation.
The rules relating to agricultural property relief are complex and professional advice should always be sought. In a successful claim, relief may be awarded at the rate of 50% or 100%. To qualify for the maximum relief, the assets such as farmland must have been used in the business for at least two years before death. Farmland utilised for personal use would not qualify, although if it were let, it should qualify.
Fisher Jones Greenwood is able to advise in relation to all commercial, rural and agricultural property transactions in conjunction with the provision of the necessary inheritance tax planning and reliefs which may be available. Fisher Jones Greenwood is also a member of the CLA, which is the membership organisation for owners of land, property and businesses in rural England and Wales.
For expert advice please contact Ellen Petersen on 01206 835300.