Development Land & Farming - A Tax Planning Guide - Live at Your Desk

Introduction

This session will consider tax planning around farm development land in terms of Inheritance Tax (IHT), Capital Gains Tax (CGT), together with VAT, SDLT, income tax and corporation tax. The session will cover tax planning around small and large farm developments post the reduction of BPS (Basic Payment Scheme) and moves to farming for the environment and the recent loss then reinstatement of SFI (Sustainable Farming Initiatives).

For many farmers, small developments can give a much-needed contribution to farm profits and cashflow but the rise in building costs must be considered in the business plans etc. The sale of farm cottages that are difficult to let out can be considered as part of this work with replacement new builds and rental property. However, the farmer must be mindful of too many investments under Balfour and s.105(3).

Consideration is given to the Statement by the Chancellor Rachel Reeves that 300,000 more houses per year will be built, amounting to 1.5 million under the term of office, which has and will have a big impact on farm development potential. We will consider hope value and BPR at 50% from April 2026 above the threshold of £2.5million x 2. This will be reviewed in the context of compulsory purchase with no hope value.

The session will also consider rollover relief for CGT and business asset disposal relief (BADR) with increased CGT rates and the drop to £1 million limit together with the emergence of the “rollover buyer”, i.e. where the development gain can be rolled into another farm CGT efficiently. There will be links with the need to incorporate farm development (large and small) tax planning into the full farm succession planning, especially for funding IHT liabilities and “later life care”.

There is also the importance of valuations, especially with the hope value and BPR at 50% above the threshold.

We will look at how to move forward with tax protection and tax planning with a farming client with potential development land for housing against a background of massive changes to farming. A total review of farm succession planning is needed for all farming clients with potential development land, and it could be argued that all farms have SOME development potential.

What You Will Learn

This live and interactive 3-hour session will cover the following:

• Post-Budget Autumn 2024 and 23 December 2025 planning - urgent with drop in BPR and APR to 50% from April 2026 and the important role of farm development land - use of surviving spouse £2.5million allowance - possible £5million at 100%
• Planning Permission changes - Permitted Development Rights - Class Q or R and the building of 1.5 million houses over the Labour term of office - impact on tax planning for farmers - big opportunities!
• The restriction of BADR on all farm development projects to £2.5million and the increased rates and greater focus on the “rollover buyer”
• The role of incorporation tax planning with R&D advantages - impact on farm development in the overall succession planning for small developments. Might use limited company for part of the development
• Sale of Carbon Credits and “greenwashing” - purchase by developers
• The impact of “farming for the environment” and loss of BPS and change to SFI together with commercial farm operation and protection of development farmland tax reliefs - the working party report is needed
• CGT loss relief on the value of BPS entitlements to reduce CGT liabilities - the small increase in CGT to 24% and increase to 14% BADR April 2025 and 18% April 2026
• Equalisation agreements and tax planning around pooling
• Grazing agreement without activity - risk to tax relief on development land - Consideration of the Gill case - the “working farmer” - BPR risk
• Weak contract farming agreements (CFAs) - risk to development land tax risks - CFAs must be very robust when development is involved and are “under pressure”
• Foster - valuation of hope value - ‘top down’ not ‘bottom up’ for probate - impact on planning - the compulsory purchase acquisition. The 50% is a worry with high values
• Graham, Vigne, Firth, Butler, Kingsworthy Meadow Fisheries and Tanner - BPR on development of diversified businesses s105(3). With BPR lost on 5 units in Tanner we will see the emergence of restructured “Tanner Farm Hotel” - must understand the investments
• The importance on the “focus on trade” on all development land tax planning and business tax relief - the Stolkin case and many others, e.g. Babylon Farms
• Overage, slice of action schemes and opt to tax VAT considerations in overall context
• The promotion agreement v the option agreement and tax protection differs on different types of project and tax position
• The need to identify CGT base cost of development land and tax planning around base cost and increased CGT rate, etc.
• Development projects using principal private residence relief and the garden development - Phillips. CGT PPR impact - the Lee case and increase in CGT
• Developing listed buildings - Heather Whyte plus VAT negative of Richmond Hill case
• Mixed rate SDLT - How Developments UT loss but Suterwalla win and Guerlain-Desai win and constant stream of cases - at last victories for the paddock and woodlands - useful for small farm sales of cottages and land
• New mixed rate SDLT case of Goudman-Peachey
• Development of farm buildings - plan ahead for VAT - Blaenau Bach Farm and complexity of zero rate for new builds, opt to tax etc.
• Bewley, Henderson and Mudan - SDLT on derelict buildings purchased for development - is it a residence? Tough decision in Mudan
• Dispute cases and potential development - learning from Maile and the headline case of Cobden

Recording of live sessions: Soon after the Learn Live session has taken place you will be able to go back and access the recording - should you wish to revisit the material discussed.