Time to Revisit Succession Plans
The Chancellor’s Spring Statement is expected to set out a number of important changes that will affect farmers and landowners. In our latest article, Mike Bracegirdle takes a look at these changes.
One way or another the Chancellor will have to seek to “balance the books” following the massive support the Government has provided, and continues to provide, as a consequence of the COVID-19 pandemic.
Currently it is an uncertain economic outlook for many farmers, especially those with sheep and dairy, amid concerns over the implication of Brexit and the continued threat of imports from countries whose animal welfare standards do not meet our own. The Office of Tax Simplification (OTS) review of Inheritance Tax in 2019 recommended streamlining IHT but this may well have the effect of reducing some of the current reliefs for farmers and landowners.
As it is at present, farmers and landowners who are actively farming or who have let land under an Farm Business Tenancy have assurance that they can pass the farm to a next generation without a crippling IHT burden. Land and property can qualify for 100% Agricultural Property Relief, whilst none-agricultural land and property together with diversified enterprises can qualify for 100% Business Property Relief as part of a farming business.
Capital Gains Tax
Transfers on death currently qualify for CGT free uplift, but the OTS recommendation would remove the free CGT uplift on death meaning that the next generation would inherit the farm at a low historic base cost , leading to a much higher CGT liability on a future sale. Indeed CGT current rates are also likely to increase if the current rumours are to be believed.
Furthermore, proposals to alter the trading test for BPR –bringing it into line to CGT trading test that requires 80% of the business trading – could leave farmers ineligible for 100% BPR.
Whatever changes are afoot, it is important to periodically review your succession plans to ensure that you are making the most of the reliefs and allowances available to you.
Butcher & Barlow LLP
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