tax planning for landed estates
DESCRIPTION
Presentation for Lexisnexis in Exeter on 21 September 2011TRANSCRIPT
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At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:
“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”
Francis Clark LLP, National Auditor of the Year – Mid Tier 2011
Tax Planning for Landed Estates
John Endacott
Tax Partner
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Field of play
• Business or pleasure, sir
• Tax changes
• Case law developments
• All about structuring activities
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Wealth taxes debate
• 50% tax rate
• Mansion tax
• Wealth tax
• Large property holdings?
• Trusts?
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Business property relief - background
• Business or interest in a business
• No relief where business wholly or mainly making or holding investments
• No relief for investment businesses
• Hybrid business – all or nothing test
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To Farmer and beyond
• FA 1976
• Caravan cases
• Factors considered in Farmer– Capital employed
– Time spent by employees and consultants
– Levels of turnover
– Net profit figures
– Overall context of business
• Historical use of properties
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Balfour case
• Brief facts– 2,000 acres
– In-hand and let farming, residential and commercial lets, grazing forestry, private water supply and shooting
– Life renter under Scottish law
• Composite nature of activities
• General assessment and impression
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Points to look at
• Bring farms back in hand?
• Share farming
• Farmer/Balfour – 8 year period considered
• Presentation of accounts
• Planning and s 106 issues
• Keep your options open
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Other activities
• Woodland– Ancillary to agriculture, or – Commercial exploitation
• Any trades connected with woodland
• Sporting rights• Shooting• Fishing
• Business or pleasure?
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BPR – Story so far
• No relief where only activity is rental income
• Good record keeping and accountancy advice required
• No single factor is determinative
• Consider restructuring
• Can Balfour make it worse?
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Farmhouses – agricultural property relief
• IHTA 1984, s 115(3)
• “Ancillary”
• “Character appropriate”
• Antrobus 1 & 2
• Starke, Dixon, Higginson, Rosser & McKenna
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Farmhouses – Golding case
• 16.29 acres
• Farmed since 1945
• 3 bedrooms (no electric)/downstairs bathroom
• “Poor state of repair”/“dilapidated”
• Farmhouse as not good enough to be a domestic residence
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Forthcoming changes - losses
• Losses condoc
– Capital allowances
– Agricultural connection
• £25,000 cap
• Restriction of losses likely
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Forthcoming changes – capital allowances
• Reductions in capital allowances
• R & C Brief 3/10
• Capital allowances and FITs - condoc
• Integral features– CAA 2001, s 198– Mandatory pooling
– More anti-avoidance
• Retrospective claims
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Furnished holiday lettings – the interesting stuff
• Property letting or trading
• New day count tests
• Capital allowances
• Ring-fenced losses
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Furnished holiday lettings – trading?
• Occupation on site
• Services provided
• Case law
• HMRC guidance
• Losses
• Business property relief
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Furnished holiday lettings – day count tests
• 105/210 days from April 2012
• Averaging
• Period of grace
• Genuine intention to let/commercial
• Watch planning restrictions
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Furnished holiday lettings – capital allowances
• Dwelling houses
• Curtilage of properties
• Integral features
• CAA 2001, s 13B
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Furnished holiday lettings – ring-fenced losses
• Restriction of losses
• Only other furnished holiday lettings
• Plan expenditure carefully
• Losses condoc
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Don’t shoot the messenger
• Is it a separate trading activity?
• Property trading or exempt (woodlands) income?
• Be careful over private expenditure
• Commercial activity – use of losses
• Benefit in kind issues for farming/estate companies
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The PAYE game
• Casual beaters (PAYE Manual 23015)
• Tips paid to gamekeepers
• Gamekeeper – benefits in kind
– Living accommodation
– Vehicles
– Clothing, licences and gundogs
• PSAs
• Company owners
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Shooting - non-domestic rates
• Not farming/agriculture
• Business rates are payable
• 28 day planning rule on change of use
• Get specialist advice
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Shooting - VAT issues
• Is it a commercial activity?
• Standard and zero-rated supplies
• Barter transactions
• VAT registration threshold
• Business splitting
• Private expenditure
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Shooting at the courts
• Rt Hon Lord Fisher
• R F Bailey (t/a Llancillo Hall Farm)
• J O Williams
• Thimbleby Farms Ltd
• E G Harrison
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VAT – disaggregation of businesses
• Forster case
• B&B and farm
• Were the two businesses sufficiently at arm’s length?
• HMRC direction overturned
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Summary of points
• More property taxation coming
• Carefully structure activities
• Think about the activities
• Be consistent
• Better news on farmhouses
• Long term planning essential
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