THERE has been a qualified welcome following the announcement on Thursday by Alistair Darling, the Chancellor of the Exchequer, that he has now decided to amend his original proposals in relation to capital gains tax. However, landowners and estate agents remain of the opinion that Darling will still hit many in the rural sector unfairly, with a potential effect on the pattern of land sales.
Anna Thomas of the Edinburgh office of Savills, one of the leading rural estate agents in the UK, said: "Whilst this change of policy is to be welcomed, farmers will still be particularly hard hit by the loss of indexation relief due to the high value of land in 1982. At current prices, for long-term holders of land, the new proposals will only benefit farms of around 350 acres or less."
Most farmers give less consideration to future tax issues than is advisable when they contemplate a major change in the structure of their business. However, it is now clear that some vendors will benefit from a reduced rate of "entrepreneur's relief" of 10 per cent on the first £1 million capital gain – but they still do not know if this will be on a life-time basis and whether the level of taxation will subsequently be increased to 18 per cent, as originally proposed by the Treasury.
Thomas added: "Agriculture in the UK would have benefited from a relief that was related to the percentage increase in value over time, rather than a flat rate, to reflect the initial high investment."
Since Darling made his preliminary announcement last October, farmers have been in a quandary as to when they should buy or sell. Meanwhile, remarkably little land has been offered for sale.
