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Utilising Agricultural Property Relief

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12 Days of Christmas - Day 8: Maids a milking

What is Agricultural Property Relief?

Agricultural Property Relief (APR) is a form of tax relief that allows you to claim relief on land that can be used for agricultural purposes, (crops or livestock) and associated buildings such as barns, outbuildings and houses used in connection with the land. 

How does APR work?

To receive APR, the land or buildings must have been owned for at least two years prior to transfer. There is one exception to this rule - if the asset is inherited from a spouse and they too have owned it for less than two years, this scenario is added to that of the late spouse. If the combined period of ownership exceeds two years then APR relief should be available.  If the owner does not occupy the property (land or buildings) which is the case usually with a Farm Business Tenancy) they need to have owned it for seven years in order to qualify for APR. 

What qualifies for Agricultural Property Relief?

Typically, APR is available for: 

  • Land used for crops or livestock 
  • Farmhouses are included as long as they have been used as a base for operations and not just a house.
  • Cottages that have been lived in by someone/family working on the land and are under a tenancy agreement. 

APR is not available for: 

  • Livestock
  • Machinery and farming equipment
  • Harvested crops
  • Derelict buildings/ outbuildings on land 
How much APR is available?

Depending on how the property is owned, relief is due at either 50% or 100%. 

Agricultural Property Relief is a powerful form of tax relief and all options should be explored as it can provide relief of up to 100% after you pass away. If your assets qualify for APR there’s no reason why your maids-a-milking shouldn’t be able to continue to do so following your death. 

As with all areas of taxation, however, Agriculture Property Relief is a complex area and expert advice should be sought on estate planning. 

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Peter has specialised in farms and rural land since doing his articles at Burges Salmon. He has worked in the Midlands for the last 25 years, advising on all aspects of rural property and farm partnerships.

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In a world where agricultural profit margins are being squeezed, yet land values have climbed rapidly, the financial stakes of rural business are high. We don’t just act on instruction, we provide solutions that exceed your every expectation.

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Protecting the vulnerable investor

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Protecting investors

As the marketplace continues to evolve at a rapid speed, investing is becoming easier than ever, particularly for younger people. However, this increasing simplicity when it comes to making gains and losses has led to experts asking whether more needs to be done to protect this ‘vulnerable’ demographic.

Recognising a vulnerable investor

The Financial Conduct Authority (FCA) defines a vulnerable investor as ‘someone who, due to their personal circumstances, is particularly susceptible to harm, particularly when a firm is not acting with appropriate levels of care’.

While this has previously been regarded as older people, the rise in young investors is prompting the question of whether this definition needs to be expanded further.

The role of the FCA

Cryptocurrency and trading success stories are often covered widely by the press, so it is no surprise that young people are lured into the world of investing. However, with less financial resilience, making a loss could have significant consequences for them.

While the FCA is taking measures to provide greater protection, due to only regulating specific sections of the wider investment market, it is somewhat limited in terms of what it can control. Many of the cryptocurrency trading platforms that are popular with younger people, fall outside of the FCA’s control.

Protecting young investors

Protecting a younger demographic of investors is an industry wide issue. FCA-regulated or not, it should fall to the society to protect the most vulnerable by raising awareness of the risks involved with investing. Rather than introducing new regulation, which could stifle innovation within the industry, the FCA should be more focused on promoting awareness.

Regulated providers should continue to assess who they regard as vulnerable and focus on producing products that take that risk into account, as well as offering advice on how best to protect new investors.

To help reach the wider market, it would be wise to get larger, well-known advisers on board to help protect and inform younger, more vulnerable investors. As influential voices in the market, sharing their approaches and advice is highly likely to get noticed by smaller businesses.

Unregulated investment product providers could consider crafting a set of principle-based rules. These could offer advice around what should and shouldn’t be said when promoting the product. Although these rules would only be advisory, the more involved they are in promoting them, the greater the impact they would have.

Working together

While there will always be some reckless businesses that expose their customers to greater risk, the vast majority of those operating outside of regulation intend no harm.

With a high appetite for risk and a lack of resilience, the industry must work together to raise awareness and offer advice in a bid to protect young investors.

Get in touch with our  investment funds  team to find out how they can help.

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Kavita is Regional Head for our South region and also Head of our Investment Funds sector. She has a formidable reputation amongst her clients for technical excellence.

She specialises in a broad range of corporate finance transactions, both for public and private companies, including acquisitions, disposals, joint ventures, funding arrangements, restructurings and cross-border transactions.

Our depth and breadth of expertise in the investment funds marketplace means we can help you navigate through what can be a complex arena. Whether you’re a fund manager or an investor, we can advise you how and where to invest, how to establish and structure a new fund, build a portfolio and ultimately, realise value from your investments.

 

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Deal

Shakespeare Martineau helps cyber security start-up secure investment

We supported fcase with securing investment from start-up and scale-up funders Wayre UK, part of Telefonica’s innovation hub.

fcase, which specialises in fraud detection and prevention orchestration technology, will use the investment to further develop its sophisticated and extremely flexible technology, which centralises and automates the end-to-end framework for fraud operation centres.

Our team, comprising Catherine Moss, Georgia Keogh, Oliver Gutman and Tijen Ahmet, advised on the corporate and tax issues relating to the investment, having previously worked with fcase advising on business immigration.

Catherine Moss, partner and corporate finance expert said: “Cybersecurity, tech and digital are all proving sound investment areas for many funds. With fraud increasing as more people started working from home, it’s innovative technologies like those created by fcase which will make a difference to the safety and security of people and businesses by creating accessible, easy to use digital solutions supporting consumer financial services products. We look forward to continuing with fcase as they grow.”

Emre Sayin, CEO of fcase said: “We found that too often, banks, financial services, and insurance companies face the challenge of siloed anti-fraud systems and operations with little-to-no cross-functional or departmental communication, delivering significant inefficiencies and gaps that fraudsters exploit. For fraud prevention and operations to be effective, the enterprise must be connected and working in harmony via one final fraud orchestration layer connecting and managing point systems, such as anti-fraud.

“With our unified system, enterprises have a full picture of their fraud operations, diminished operational challenges, and a superior customer experience. Not only does fcase set a new standard for fraud operations management, but we also guarantee effective customer support through our 24/7 on-call system.

“This is a really exciting step in our growth journey and the team at Shakespeare Martineau have played a crucial part in getting our business investment-ready.”

Contact us

For any further information, or to see how we can support your business plans, contact Catherine Moss or another member of our corporate team.

Our corporate team is ranked as a Leading Firm in the Legal 500 2021 edition.

Our updated guide to recovery and resilience covers everything you need to navigate your business out of lockdown, unlock your potential and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.  

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Developers: How to tackle tax during COVID-19

Developers: How to tackle tax during COVID-19

COVID-19 has led to a slowdown in the residential sales market. As a result, many developers are turning to letting their completed units on short-term leases to temporarily prop up their revenues. However, this switch in approach isn’t quite that simple. To ensure it is commercially viable, and acceptable to HMRC, developers must know the VAT implications.

Beware of clawback adjustments

Clawback adjustments are when a taxable person changes the use of the goods or services they are providing, so their VAT liability changes from taxable to exempt and a repayment is required to HMRC.

Newly-built residential properties that are sold or let on a long lease (over 21 years) are classed as zero-rated supply. Simply, this means the owner doesn’t need to add VAT to the sale price and can recover any VAT incurred during construction (input VAT).

However, letting a property on a short lease makes it an exempt supply, so VAT does not need to be added to the sale price, but input VAT cannot be recovered.

As developers tend to recover input VAT during the construction process, changing their intention from selling to letting on a short-term lease will lead to clawback adjustments.

Read more about our residential development team.

Relief is available

The 2008 financial crisis led to the government introducing a concession that allows developers to let their housing stock without clawback. This concession means that HMRC look at just a decade’s worth of receipts when calculating clawback, enabling developers to pay only partial clawback of input VAT if they are letting a property for less than ten years.

However, developers must record their intention to let the properties only until the market picks up.

Issues regarding land promotion agreements

Promoters’ fees – A payment by a promoter to the landowner, which represents an advance on what the landowner will receive after the land is sold with planning permission.

It is often assumed that VAT is due on the promoter’s fees payment, but this isn’t necessarily the case. VAT suggests a service is being supplied to the promoter, but the payment can just be a way to entice the landowner to enter into a promotion agreement. Therefore, it can be argued that VAT isn’t due.

For landowners selling land to developers before construction starts, it is important to register for VAT and make a VAT election, ensuring VAT charged by the promoter can be recovered. 

Stamp Duty Land Tax (SDLT) considerations

In 2004, the Government imposed an SDLT charge on developers, even if the land is sold directly to the end buyer. Under this legislation, the developer is also deemed to have acquired the land, and so they must file an SDLT return if the chargeable consideration is over £40,000.

We’re here to help

Having a clear knowledge of HMRC’s guidance can help developers make informed decisions and optimise their tax position during this uncertain period.

Sign up for our free 20 minute webinar on VAT and stamp duty land tax issues for developers, house builders and landowners on Tuesday 28 July or learn more about how our team of corporate tax specialists can help.

Contact us
For further information please contact Oliver Gutman or another member of the corporate finance team.

We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.

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Our free legal helpline offers bespoke guidance on a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. We also have a team of experts on hand for any queries on family and private matters too. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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Who pays business rates – the landlord or the tenant?

When a commercial property is occupied, the tenant is responsible for paying business rates. In some cases, the landlord will pay the rates on behalf of the occupier and include the amount paid within the rent.

However, the owner of a commercial building will be liable for paying the business rates if the property is unoccupied. After a tenant leaves a property, the owner is exempt from business rates for a concessionary period thanks to ’empty property relief’ – the period is six months for factories and warehouses, and three months for all other commercial premises including offices.

 

What are business rates loopholes?

Business rates loopholes are legal workarounds that enable a company to mitigate or avoid paying business rate charges entirely. Some view the empty property relief as a type of business rates loophole, in that it allows landlords to use short-term lease arrangements to reduce the business rates they have to pay (more on this below).

 

Empty property relief: a business rates loophole?

Empty property relief was first introduced in 2008, meaning that if a building is left unoccupied, landlords do not have to pay business rates for three months (six months for factories and warehouses). Ever since this, landlords with properties for which they cannot find long-term tenants have been using short-term lease arrangements as a way to mitigate their annual business rates.

Under these arrangements, the landlord will typically rent out properties on short-term leases, often on very favourable terms for the tenants, allowing the landlord or property agent to take advantage of empty property relief when the lease is up and the tenants leave. Done properly, this can be a sure-fire way to significantly reduce business rates liability.

Local authorities, fully aware of this practice, tend to challenge these short-term occupations at every opportunity, usually pushing for evidence that the property is genuinely occupied and that there is a commercial benefit to the occupation. They claim that to be regarded as a ‘rateable occupation’, the tenant should be seen to be running a business from the premises to make a profit and if they are not, then they should be exempt from accessing empty property relief.

The case – Principled Offsite Logistics Ltd v Trafford Borough Council

One case, heard recently at the High Court, saw Trafford Borough Council arguing that use of a premises just to store goods on a short-term basis did not mean that any commercial benefit was being gained from its occupation. In this instance, the tenant openly described the arrangement as a ‘rates mitigation scheme’, one in which they would pay a peppercorn rent to the landlord in exchange for storing their goods at the premises, as well as receiving a percentage of the savings when empty property relief was leveraged.

In light of this, Trafford Borough Council obtained Magistrates’ Court summonses seeking rates liability orders against Principled Offsite Logistics Ltd. However, Principled pushed back, challenging the Council’s approach by requesting a judicial review.

The court’s review concluded that, despite the Council’s protestations, ‘rateable occupation’ does not legally have to be for commercial benefit and instead has to be merely of some benefit to the tenant. This outcome means that local authorities will no longer be able to successfully levy their most common complaint against this type of rates mitigation scheme, and businesses, commercial landlords, property agents and corporate occupiers can breathe a sigh of relief.

However, this doesn’t mean that the situation won’t still change in the future. Local authorities still consider these schemes to be a loop hole in the law and could well see this recent high court decision as reason enough to push for legislative changes. Either way, there are likely to be further challenges ahead.

 

The commercial dispute resolution team at Shakespeare Martineau has successfully defeated a number of challenges relating to rates mitigation, acting on behalf of landlords and corporate occupiers in both Magistrates Court and High Court.

To discuss any of these issues further, please contact Barry Jervis or Ben Humphreys of the dispute resolution team. For more information about how we can help you, get in touch today or visit our litigation and dispute resolution page.