farm succession planning simpkins edwards, stags and toller beattie

Agricultural Update for Farmers and Landowners

Barnstaple

Tuesday 21st October 2014

Mark Neason BSc (Hons) MRICS FAAV

Stags Professional Services

Permitted Development

The West Country is Stags Country stags.co.uk

The West Country is Stags Country stags.co.uk

Town and Country Planning (General Permitted Development) (Amendment and Consequential Provisions) (England) Order 2014

• 6th April 2014

• Agricultural buildings to dwellings, up to 3 units (their combined floor area must not exceed 450m2)

Permitted Development

The West Country is Stags Country stags.co.uk

• Prior Approval for Change of Use - Class MB(a)

• Prior Approval for Building Operations - Class MB(b)

However this can be done through ONE application

One application can include all 3 buildings

Permitted Development

Process:

- 56 days from receipt of application to consider and approve or refuse

- No decision = deemed consent

- Right to appeal a refusal

stags.co.uk The West Country is Stags Country

Permitted Development

The West Country is Stags Country stags.co.uk

The Exclusions

Designations

Conservation Area

Area of Outstanding Natural Beauty (AONB)

National Park

World Heritage Site

Statutory Listing

Site of Special Scientific Interest (SSSI)

Safety Hazard Area or Military Explosives Storage Area

Scheduled Monument

Permitted Development

The West Country is Stags Country stags.co.uk

Permitted Development

Building must pre-date 20th March 2013

Building must have been in agricultural use on 20th March 2013 or last used for agricultural purposes

Maximum internal footprint to be converted = 450m2

3 Dwellings per established agricultural holding

10 year bar on erecting new buildings under PDR

Partial demolition

The West Country is Stags Country stags.co.uk

Permitted Development

Areas to be addressed:

• Transport and highways impacts;

• Noise impact;

• Contamination risk;

• Flooding risk;

• Location and siting needs to be practical and desirable;

• Garden size.

The West Country is Stags Country stags.co.uk

Under offer above guide

The West Country is Stags Country stags.co.uk

Permitted Development

Barn at Nr Templeton, Tiverton in 5.5 acres sold at auction £230,000.

The Scenario

Mervyn Janet

Chris Chloe Lauren

The West Country is Stags Country stags.co.uk

Permitted Development

• Mother and Father own a 300 acre dairy farm. They live in the farmhouse.

• Son, Chris, farms in partnership with his Mother

and Father but owns nothing in his own right. He rents a small cottage in the local village with his pregnant wife, Lauren.

• Daughter, Chloe, is a Nurse and lives in town with

her fiancé.

The West Country is Stags Country stags.co.uk

Permitted Development The Scenario

Map of the farm

Farm Lane

Building B Farmhouse

Building C

Building D

Slurry Store

Modern Agricultural Buildings & Parlour

Building A

The West Country is Stags Country stags.co.uk

Permitted Development

The West Country is Stags Country stags.co.uk

Permitted Development Building A

No apparent

major issues.

Objectives:

Do you want to sell it away or rent it out or is it for a family member or worker to be nearer the farm?

Map of the farm

Farm Lane

Building B Farmhouse

Building C

Building D

Slurry Store

Modern Agricultural Buildings & Parlour

Building A

The West Country is Stags Country stags.co.uk

Permitted Development

The West Country is Stags Country stags.co.uk

Permitted Development Building B

Issues:

– Location: close to the farmhouse (possible depreciation in value to both due to close neighbours, wouldn’t split easily).

Permitted Development

stags.co.uk The West Country is Stags Country

Inspiration?

Map of the farm

Farm Lane

Building B Farmhouse

Building C

Building D

Slurry Store

Modern Agricultural Buildings & Parlour

Building A

The West Country is Stags Country stags.co.uk

Permitted Development

The West Country is Stags Country stags.co.uk

Permitted Development Building C

Issues:

– Access

Permitted Development

stags.co.uk The West Country is Stags Country

APPROVED!

Map of the farm

Farm Lane

Building B Farmhouse

Building C

Building D

Slurry Store

Modern Agricultural Buildings & Parlour

Building A

The West Country is Stags Country stags.co.uk

Permitted Development

The West Country is Stags Country stags.co.uk

Permitted Development Building D

Issues:

– Noise

– Practical or desirable location and siting.

Permitted Development

stags.co.uk The West Country is Stags Country

The possibilities are endless…

The West Country is Stags Country stags.co.uk

Permitted Development

Thank you for listening.

Mark Neason BSc (Hons) MRICS FAAV 01823 653424

m.neason@stags.co.uk

Mary Jane Campbell

Partner, Simpkins Edwards LLP

Tax and properties

Tax and planning / planning for tax

What do you want to achieve?

Convert to residential properties where

possible?

Provide on-farm accommodation for

Chris?

Provide for Chloe?

Timing?

Tax planning

About maximising reliefs

Be clear who owns what

How much did the assets cost (CGT)

What have they been used for / by

whom?

Planning changes – think tax as well as

practical aspects

Taxes

Taxes (and reliefs) to consider

Capital gains tax (rollover, holdover,

PPR, ER)

Inheritance tax (APR, BPR)

VAT

SDLT

Income Tax (?)

On-site accommodation for Chris

Develop building B for Chris?

Give Chris farmhouse and develop building B for

Mervyn and Janet?

Gift building B to Chris (claim holdover relief)

Chris uses DIY house builders scheme to

recover VAT

IHT – Potential Exempt Transfer (7 year clock)

No consideration: No SDLT

On-site accommodation for Chris

If subsequent house swap:

No capital gains tax if PPR relief applies

Potential SDLT charge for both

properties(?)

APR relief on farmhouse can be

maintained

No VAT implications

Providing for Chloe

Needs to be practical – assume Chloe not

interested in a building next to a slurry

store!

Might be interested in building A? Let’s

say she doesn’t want to live on the farm.

Challenging to find a way of making gifts

without compromising farm.

More of Chloe later………

Financing

How to finance the developments and / or

gifts?

Can you borrow against future rental

income?

Sell an asset – e.g. building A for 3rd party

sale?

Sell as a plot or develop?

Develop building A for sale

Partial Exemption VAT scheme

Ability to recover input VAT on exempt

supplies

Limited to £7,500 or maximum of 50% of VAT

Reduced rate VAT (5%) for work and materials

supplied by a building contractor.

Who will do the building work?

Develop building A for sale

CGT – payable

Currently 2 partners therefore 2 x Annual

Exemptions (£11,000)?

Partnership asset first? (extra AE)

But – implications of trading

Sell plot prior to development

Rollover

Gain made on disposal of building A prior

to development

Re-invest in developing building D for

farm-workers accommodation or C as a

FHL?

Is conversion of building D

commercially sensible?

Convert building C to FHL

Who will run the FHL?

When to transfer to Chloe? If before

conversion could gift cash to pay costs

Outright gift or use a trust?

Control of assets

No IHT on death if survive gift(s) by seven

years

Succession planning

Retain assets or gift during lifetime

Should Chloe get assets or cash/ when? Plan

now – especially for cash option.

Will current favourable IHT reliefs remain in

place?

Lifetime transfer into trust could “bank” reliefs

without losing control.

Mary Jane Campbell

Partner, Simpkins Edwards LLP

mjcampbell@simpkinsedwards.co.uk

01392 211233

Removing Agricultural Occupancy

Conditions from Dwellings

Robert Gross - Toller Beattie, Solicitors

Agricultural “need” is

The justification for a new dwelling in the

countryside.

But circumstances change.

40

The Current Wording

The occupation of the dwelling shall be limited to

a person solely or mainly working, or last working,

in the locality in agriculture or forestry, or a widow

or widower of such a person, or any resident

dependants.

41

Methods to Remove:

1. Planning Application – on the merits

2. Application for a Certificate of Lawfulness –

breach for a period of 10 years

3. A technicality

42

A Normal Planning

Application

To prove:

The need for an agricultural dwelling no longer exists:

• On the holding and

• In the locality

Usually by:

• Suitable marketing

• For a “reasonable period”

• At a “reasonable price”

43

Application for a

Certificate of Lawfulness

Breach of Condition for 10 years

Law and Evidence

Not the merits

Not planning policies

44

The wording of Conditions

has changed over the years

• In agriculture

• Solely or mainly in agriculture

45

“Last Working” in

agriculture

• Before retirement

• Before ill health or unemployment

Not your “last job” before your current job.

• Have you really “retired”?

46

In the Locality

• The relatively immediate “locality”

• Various interpretations

47

In “agriculture”

e.g. Not rearing pheasants primarily for shooting.

e.g. Not rearing trout primarily for fishing

48

• Widow or Widower

• Resident Dependants

49

Effect of the Certificate

A Certificate of Lawfulness “certifies” that the breach has become

lawful:

• On the date of the application

• The breach becomes lawful, but the condition is not removed

• The condition can be “resurrected” if someone again complies with

the strict wording or one breach ceases and then a new breach

begins

50

Technicalities

• Not built in accordance with the permission:

- In the wrong place

- Not in accordance with the plans

- Pre-conditions not complied with

51

Recent New Rules

• If “deliberately concealed”

And “just” in all the circumstances

• Or “deception

52

53

54

Partnership Act 1890

That’s what you get if you don’t agree

something else!

Easy to get into partnership

Harder to get out of it

Before you go into partnership think the

unthinkable and plan for the unacceptable

Plan your exit strategy

What is it going to be a partnership of:

- Everything

- Just the business

- Or farmland and the business

Valuation going in and valuation coming out

Get it agreed.

Write it down and update it when you agree

changes