Key tax issues for landowners
Following on from the Antrobus and McKenna Cases, further case law continues to examine the criteria needed to fulfil successful claims for both Agricultural Property Relief and Business Property Relief with regard to Inheritance Tax. Care should be taken, therefore, in any farming arrangements, particularly contract farming and/or joint venture agreements, to ensure these advantageous reliefs are not inadvertently foregone.
For landlords with land occupied under old style tenancies under the Agricultural Holdings Act 1986 opportunities are available to increase Agricultural Property Relief for Inheritance Tax purposes from 50% to 100% with a surrender and re-grant of the tenancy. The tenant’s right to security of tenure remains unaffected in such arrangements.
Losses on furnished holiday lettings will no longer be available for general set off for Income Tax purposes. Furnished holiday lettings will also no longer be a qualifying asset for rollover relief for Capital Gains Tax purposes.
Stocktaking Valuations have also come under closer scrutiny with recent case law. Whilst depreciation is allowed for within annual accounts, tax computations disregard depreciation making capital allowances available instead. As depreciation is excluded from taxable profit it has been held that it can be similarly excluded from stocktaking valuations for tax purposes thus deferring the payment of tax. Depreciation must, however, remain within the valuation for accounting purposes. The benefit of this to the taxpayer is that the payment of tax is effectively deferred.
Increasing financial contributions are being required from the landowner in addition to their capital tax liability with regard to any redevelopment of land. Affordable housing is now required in the majority of residential development schemes and can apply at 30% of the number of units developed on sites of three units upwards and is in some circumstances more. Community infrastructure levy is also to be introduced, which is a charge on development to contribute to the funding of infrastructure within the community as a result of any development.
Both care and action is, therefore, recommended for any tax planning, as, in our opinion, the rates are more than likely to increase and the relief available harder to claim.
For further information contact Edwin Lee (01353) 654911.
