Entrepreneurs' relief on farmland

Entrepreneurs' relief on farmland

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BIM55065 says that we can treat short term grazing licences as continuing the same trade of farming. So does it then follow for capital gains that we can claim ER on the sale of the farm land?

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Portia profile image
By Portia Nina Levin
06th Jan 2015 11:33

To qualify for ER

There must be a disposal of assets used for the purposes of a trade at the time that that trade ceased or there must be a disposal of a trade or part of a trade.

A trade for this purpose is defined in TCGA 1992, section 288 as having the same meaning that it has for the Income Taxes Acts, and in section 169S as including a profession or vocation.

The meaning of trade for the purposes of the Income Tax Acts is given in ITA 2007, section 989; a trade or a venture in the nature of a trade.

BIM55065 deals with the deeming provision in ITTOIA 2005, section 9, that says that all farming and market gardening activities carried on by a person shall be treated for income tax purposes as the carrying on of a trade.

BIM55065 confirms that short-term grazing constitutes farming and so is part of the deemed farming trade.

The meaning of trade is unaltered by section 9 though.

So I would say that, even if your grazing land were sold within circumstances that would otherwise put it within my first paragraph above, it is not likely to qualify for ER.

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By Di
06th Jan 2015 12:38

We have been originally farming with stock and then sold the stock and carried on just farming the land i.e. fertilizing etc and renting it out on short term basis and receiving the single farm grant. If we now have sold the farm house and land are we not disposing of the assets used for the trade?

 

 

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Portia profile image
By Portia Nina Levin
06th Jan 2015 13:12

Trading

The trade was the original farming. I would consider it unlikely that the subsequent rental would be considered trading, but the continued fertilization might assist.

How long ago did the actual farming cease?

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By Di
06th Jan 2015 13:21

2004 was the last year that they held livestock. Is there any case law to refer to? I really need to backup the final decision. I originally thought there would be no ER available then I was pointed to the BIM and it made the position unclear.

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By Marion Hayes
06th Jan 2015 13:43

CLA

I would suggest you contact the Countryside Landowners Association as their Tax department will be able to look at your grazing agreements to see if they qualify. If you continued to qualify for the Single payment it is a possibility

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By Di
06th Jan 2015 13:58

Thanks Marion, I've just found a good article in Taxation September 2014 by Julie Butler. Its all down to the grazing agreements which in this case I don't think there were any!

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Portia profile image
By Portia Nina Levin
06th Jan 2015 14:50

Hang on

I thought we were talking about entrepreneur's relief, not agricultural property relief and business property relief, that were the subject of Julie Butler's article?

Those turn on whether the income from those activities falls to be treated as farming income under ITTOIA 2005, section 9, which I cannot see applies for the purposes of entrepreneurs' relief.

EDIT: I see that brief reference is made to the land "may" qualify for ER. Whilst I must bow to Lulie Butler's greater experience on farming matters, that view does differ from my interpretation.

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By Marion Hayes
06th Jan 2015 15:05

Practical oporation

The lack of written agreements will not necessarily matter if facts support the principle.

You need to demonstrate that they were growing and selling a crop of grass.

Is there is a flock of sheep coming in for a couple of months and then off again with no expectation on either side that the grazing is the grazers.

Letting a lady in the village graze her ponies all year round is unlikely to succeed for a variety of reasons.

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Portia profile image
By Portia Nina Levin
06th Jan 2015 15:12

Okay

Marion is starting to persuade me!

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By Di
06th Jan 2015 15:39

Grazing

No horses or ponies just cattle and sheep. Land owner purchased the fertilizer when deemed necessary as not over grazed and had other farmers animals grazing the land. There was definitely no expectation regarding the grazers but we may have to push the husbandry. 

 

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By Marion Hayes
06th Jan 2015 15:47

@Portia

Thanks - just a pity I can't spell!!

You can't edit a title.

Managing the land apart from fertiliser is the reponsibility for fencing/hedges, mowing paths and keeping the weeds down in general.

Very like the agreements farmers entered into to qualify for setaside etc

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By Di
07th Jan 2015 08:25

Thanks for your advice

It looks like I should make the claim and just beware that it may be queried.

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