Can we claim mortgage interest on this farmland?

Client owns a property with some farmland - intends to use it for events as a trade.

Didn't find your answer?

I have a client who purchased a farm 8 years ago as a residential property - he has never farmed the land (around 17 acres).

He now intends to hosts weddings/festivals/events/camping etc on the farmland having gained all of the necessary licences from the local council.  What would be the best way/is it possible to justify a proportion of the mortgage interest as a business cost?  Would he need to have the land and property valued separately so we can ascertain what amount of the interest could be classed as a cost?  Is a separate commercial mortgage needed for the land?

Any help or advice would be appreciated.

Replies (7)

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By CJaneH
22nd Feb 2024 15:44

I would suggest at the least he will need a valuation to apportion interest.
He will need to contact his lender to establish if new mortgage(s) are needed.
A valuation at time of purchase splitting the house and garden and non commercial buildings from the field(s) and buildings used for commercial purposes will aid future Capital Gains calculations.
A personal gripe of mine is the description that your client purchased a farm. Your client did not purchase a farm, he purchased an ex-farmhouse with no doubt redundant buildings and a small field or so.

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By Ozzi
22nd Feb 2024 17:04

Thanks for replying CJaneH - apologies I only call it a farm as he refers to it as a farm and the name of the property is 'X Farm'.

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Replying to Ozzi:
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By Bobbo
22nd Feb 2024 17:13

X Farm? Is your client Elon Musk?

[joke]

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Replying to Bobbo:
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By Ozzi
26th Feb 2024 09:16

I've always said that I would never work with a client whose name could also be confused with a man's aftershave!

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Replying to Ozzi:
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By CJaneH
22nd Feb 2024 17:25

As I said it is a personal gripe. I agree most ex-farmhouses are referred to as xxxxxx Farm. It does lead to short term mis-understandings when reading newspaper reports etc.

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By More unearned luck
22nd Feb 2024 18:22

Are you saying that the client has left the arable land fallow and the pasture ungrazed and any woods and spinneys uncoppiced for 8 years? If so, what a waste of resources. I bet he has let/licenced the land to neighbouring farmers. Perhaps the rent has been paid in kind. Is an LPC disclosure required?

Subject to your question about remortgaging (which is clearly one to be asked of the mortgagee) any fair apportionment of interest should be based on the purchase price, rather than a current valuation. Do the permissions cover the entire 17 acres?

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Replying to More unearned luck:
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By Ozzi
26th Feb 2024 09:21

Thanks for your reply - he has said that he's worked overseas for several years pre-covid and since then has worked around the UK but all the time away from home. I don't have any reason to doubt his story but do agree it's a waste of resource (he said as much himself in our recent meeting).

RE: permissions I'd have to check but it's a good question, thank you.

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