Syngenta UK
Farminguk
29 September 2016 | Online since 2003
Scrutton Bland


7 July 2014 16:34:35 |Finance,News

HMRC proposals 'will hamper succession planning'


Andrew Vickery

Andrew Vickery

Farmers could face steep hikes in Inheritance Tax if new HMRC proposals come into force, rural accountants warn.

Currently, landowners can put properties into trusts in order to hand them over to the next generation; often saving Capital Gains Tax and Inheritance Tax in the process, says head of rural services Andrew Vickery. But now HMRC is proposing to cap the tax-free value of trusts at £325,000, meaning any properties worth more than that may incur IHT charges.

“In recent years trusts have become a useful tool for many family farms looking to either protect assets or pass them down to the next generation,” says Mr Vickery. They have been particularly beneficial for farmers with let properties, which have often lost tax reliefs upon ceasing to be working business assets, he adds. “As farm worker numbers have declined, the number of farm cottages being let on the open market has increased. At the same time, the value of those properties has rocketed.”

With the value and location of cottages often integral to the farm business, many farmers have opted to put them into discretionary trusts, enabling them to be passed down to the next generation tax-free. “Not only do discretionary trusts provide IHT relief, they also defer the capital gains that might arise in the case of an outright gift from one generation to the next,” says Mr Vickery. “Given how much property values have risen over the past 20-30 years, that presents a significant CGT saving.”

In addition, discretionary trusts enable the older generation to control the assets (although not benefit from their rental income), thus protecting against divorce or financial difficulties.

However, in recent weeks, HMRC has announced plans to clamp down on the tax benefits of trusts. “Historically, one individual could set up multiple trusts, each of which could qualify for its own IHT exemption - currently £325,000 after every seven years,” says Mr Vickery. “But the proposal is that all trusts set up by an individual after 6 June 2014 would have to share just one of these exemptions for the rest of that person’s lifetime.”

This means that farmers with let assets worth more than £325,000 will not be able to pass them on tax free through trusts. “The detail is inevitably complex, but if these proposals are put into practice, farmers will have to find other ways to pass assets down the generations without incurring high IHT and CGT bills,” says Mr Vickery.

“The principal message is not to panic but consider as soon as possible whether your family farming business is likely to be exposed to IHT, and assess how to pass assets safely to future generations in a way that will allow them to continue farming.”

Trusts will still be an option for many farmers, but may not be the only solution in the future, he adds. “The process of passing assets over is likely to take longer as a result of the changes, if significant tax charges are to be avoided. There remain a good number of other options available and we would be pleased to speak to anyone who wants to understand their potential IHT liabilities better.”

Download

0 Comment

loginuserlogo
Name

Please enter your name


Email

Please enter your email

Please enter valid email


Comment

Please enter your comment


Post Comment

Your comment has been submitted successfully. Please wait for admin approval.


Comments

No comments posted yet. Be the first to post a comment


Ireland | 29 September 2016
Irish dairy farmers seek €11m under EU milk reduction scheme

Irish dairy farmers have sought €11m to reduce milk production during the final three months of the year under the European Union’s Voluntary Milk Reduction Scheme. This is according to the Ministe...


USA | 29 September 2016
U.S. cattle prices continue to erode as supplies rise

Rising beef supplies and large supplies of competing proteins are eroding prices on fed cattle headed for slaughter, and market volatility continues to be the focal point of the U.S. market. In the...


USA | 29 September 2016
Farmers suing Syngenta over GMO corn granted class action status in federal court

A federal judge has granted class action status to at least 440,000 farmers accusing agrochemical giant Syngenta of selling genetically modified corn seeds and costing them billions of dollars in lost...


Australia | 29 September 2016
Global dairy prices lift as farmers slash production

Global dairy prices are rising as farmers around the world cut back on production, but local prices are still below the cost of production for many south-east Australian farmers. The previous Globa...


Puerto Rico | 29 September 2016
Puerto Rico Experiences an Agricultural Renaissance

For the first time in nearly 30 years, Puerto Ricans are buying rice, vegetables and traditional crops such as plantains and pineapples, that are produced on the island. As new farms spring across ...



Trending Now

Viewed
Discussed


Top stories you may have missed
FarmingUK
FarmingUK Logo

FarmingUK

Farm subsidy payments funded by the UK taxpayer are being paid to millionai...


FarmingUK
FarmingUK Logo

FarmingUK

Labour will end the badger cull and prioritise ending bovine TB, Shadow Def...


FarmingUK
FarmingUK Logo

FarmingUK

A herd of rare White Park cattle could die out if its owners do not urgentl...


FarmingUK
FarmingUK Logo

FarmingUK

The UK government is "failing" to support farmers in the long-term accordin...


FarmingUK
FarmingUK Logo

FarmingUK

Retailer Co-op has announced that from May 2017 all of its bacon and lamb w...


FarmingUK
FarmingUK Logo

FarmingUK

Over 50 wildlife organisations have compiled a stock-take of all the UK's n...


FarmingUK
FarmingUK Logo

FarmingUK

In the run up to the EU farm ministers meeting the agricultural sector have...


FarmingUK
FarmingUK Logo

FarmingUK

The RPA must iron out a number of problems that still exist with 2015 BPS p...


FarmingUK
FarmingUK Logo

FarmingUK

Tourism businesses in the countryside are being held back due to the uncert...


FarmingUK
FarmingUK Logo

FarmingUK

A 24 point action plan aimed at revitalising Scotland's sheep sector after ...


closeicon
Username
Password