Tuesday, 27 September 2016

Farm borrowing in the UK

Farm borrowing in the UK has doubled in the last decade and at the end of October 2015 stood at £17.7bn but with interest rates at historically low levels, is now the moment to consider fixing rates for at least some of your long term borrowing?

This is a notoriously difficult question to answer and one on which I am not qualified to advise but what is for certain is that the long term fixed rates which are currently on offer are well below anything I have seen in my 25 year career.

Having said that, those borrowers who have stuck with variable rate loans over the last 6 or 7 years will have generally fared better than those on fixed rate loans. This is because base rates have remained fixed at 0.5 % since 2009 then fallen to 0.25% in the wake of the BREXIT referendum and while there is still potential that rates could fall further one may question why one should consider fixing one’s borrowing at all.

Well, the primary advantage of fixing rates is that you “know where you are” in terms of repayments over the fixed term of the loan. To some borrowers this is a great comfort for budgeting purposes and it outweighs the higher interest rates that are usually charged for fixed rather than variable rate loans at any one time.

However, one cannot help feeling that if a business cannot afford the low rates that are currently being offered on fixed rate loans then the business should perhaps not be borrowing the money in the first place.

Indeed it seems we are in uncharted economic waters and with interest rates and inflation remaining low, this means that the value of any money that is borrowed today will not be eroded in real terms by the effects of inflation as it was in the 1970s and 80s for example. Therefore currently, it is not so much the interest payments but the capital repayments that represent the most significant element of repaying one’s debt.

But, this era of low interest rates and low inflation may not last forever and one may rue the day that one did not take advantage of the long term fixed rates currently on offer. 

Therefore now maybe a good moment to consult your financial advisor to see what offers are out there, whether that be borrowing from one of the High Street Banks or specialist agricultural lending institutions such as the Agricultural Mortgage Corporation.

Finally whatever decision you do make you must be sure to understand the terms of your loan and in particular where fixed rate loans are concerned you need to appreciate the potential redemption charges that may apply if you want to repay a loan early.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

All shapes and sizes

When is a corridor not a corridor?  When it’s an arc. What’s the difference between a cluster and a hub? Nothing material.

The terminology used to characterise what’s going on in any one area of our eastern region serves only as useful shorthand. What matters is what is actually going on inside this corridor, arc or even valley. And the past summer has seen some action in this regard.

The London-Stansted-Cambridge Consortium has been focusing on how the devolution of powers could contribute to pumping-up and serving the growth potential of this corridor to and from London in the coming 20 years.

The London School of Economics (LSE), in suggesting a serious review of the Green Belt around London, referenced the London-Stansted-Cambridge corridor as a pilot for the LSE’s idea of complementing growth corridors with green ‘wedges’ as part of a new view of the Metropolitan Green Belt.

Meanwhile the National Infrastructure Commission (NIC) – which was launched last November – sees a corridor of growth between Cambridge, Milton Keynes and ‘the Other Place’: Oxford.  With a focus on the disjointed road and rail connections between these three key locations, the NIC is charged with recommending improvements and solutions that will assist in supercharging transport links to reconcile the two old and the one new city.

Taking Cambridge alone, the ‘growth but where?’ debate has continued over the summer – and will doubtless do so well in to the coming if, somewhat stalled, autumn season.  The City Deal has been considering how best we can transport the current and future population of Cambridge through and around its historical, geographic boundaries.

All these august bodies are taking a strategic view for future growth. Meanwhile, over the summer, growth is actually going on with new development either rising up out of the ground or taking firmer shape through the planning process.

A round-up of summer site action reveals housing as key to unlocking support for developments on a number of projects.

Jesus College’s proposal for a new business park ‘Cambridge South’, on the city’s southern fringe by the M11 motorway, includes a significant housing element.

A new sporting village in Trumpington – promoted and proposed by Grosvenor Estates - includes plans for 520 new homes, of which over half could be built in the coming five years.

Plans for the re-purposing of Waterbeach barracks as the basis for a new settlement - on the same lines as Northstowe - have moved a step forward over the summer.  Homes for occupation as early as 2019 are being mooted by the promoting developer, Urban & Civic. 

Meanwhile over at master developer Gallagher Estates’s Northstowe, housebuilder Bloor is on schedule for completions on the first phase of brand new homes in early spring 2017.   The school building at Northstowe has had life breathed in to it this autumn term by primary school pupils from nearby Longstanton whose own school is being extended and renovated to cope with a growing roll-call in the catchment area.

And, as schools returned, Brookgate revealed its plans for homes as part of a mixed use’CB4’ development to complement the new railway station at Cambridge North.

Perhaps the biggest of all the summer developments front – although without a residential housing element - was the granting of outline planning consent of the second phase of 23 acres at the Cambridge Biomedical Campus.

Call it a cluster a hub, an arc or a corridor, this summer has seen the next chapter in the history of this ancient city and its sphere of influence take shape.

Will Mooney MRICS

Commercial, Cambridge

Suffolk’s highest HNW revealed...

High net worth individuals – known by the acronymn HNWs – are coveted by those companies with something to sell in the retail, professional or financial services sectors, including property agents.

HNWs are not only attractive for their wealth but for the influence they wield in setting trends and the cultural values of our times.  It’s accepted in our consumer society that HNWs set a tone and lifestyle to which the rest of us non-HNWs are encouraged to admire and aspire.

How fortunate then are we in Suffolk that one of our most stellar HNWs is so off the scale that mere mortals cannot ever attain his lifestyle and achievements because it’s a horse!  He’s champion racehorse and super-stud stallion, Frankel.

Setting aside phenomenal achievements and earnings for Juddmonte Farms on the turf during Frankel’s illustrious racing career, in retirement the eight-and-a-half year old stallion is, indeed, a most coveted creature.

Worth around £12.5 million per annum, Frankel is Suffolk’s highest Horse NW. His fee at standing is circa £125,000 per mare and he’s covered about a 100 since his time at stud.  With intercontinental progeny winning races presently Frankel’s ‘performance’ fees can only rise next year –that’s without the anticipated achievements of his southern hemisphere offspring whose racing season is yet to play out.

Frankel puts the Horse in HNW when it comes to Suffolk. There’s fun in such flippancy and word play, but the influence of Newmarket in our county’s wealth and prominence on the global stage is seriously undeniable.  We all benefit from that, whether or not we consider ourselves of the “horsey-set”.

Newmarket is the home of the international horseracing industry. Without it, Suffolk would be the poorer both culturally and in cold, hard cash terms. Newmarket’s horseracing industry makes an economic contribution of £208m to the local economy and 8,500 jobs are linked to the industry in the area (source: Newmarket Horseracing Industry by SQW, September 2015).

Horseracing, as a sport, is second only to football in the UK. While Cheshire is home to Premier League footballers of both Manchester clubs in modern times, Suffolk has been home to the Sport of Kings since the 17th Century.

As the county hosting an ├╝ber modern industry of global investment Suffolk commands a unique position.  Much like the revamped National Heritage Centre for Horseracing and Sporting Art that relaunched in Open Newmarket Weekend in the middle of this month, our heritage attracts attention.  Yet like Jilly Cooper’s latest novel “Mount!” - based on the racing and stud industry - Suffolk’s a best seller. And there’s something so amusingly typical of our county’s unique charm that our highest earner has four legs as opposed to two: fabulous Frankel – our highest Horsey Net Worth!

Caroline Edwards
Residential Sales, Long Melford

T: 01787 888622
E: caroline.edwards@carterjonas.co.uk

Wednesday, 14 September 2016

A Clearer View - September edition

Since the government implemented its Stamp Duty Land Tax ('SDLT') reforms in April of this year, applying an additional 3% levy to buy-to-let ('BTL') properties, many landlords are scrutinising their portfolios to ensure that their investments are maximised.

Navigating SDLT reforms, however, is a sensitive and complex manoeuvre, and often calls for expert advice. In this edition of Clearer View, we have invited the Tax Team at Price Bailey Property to share key advice for buy-to-let investors.

Company ownership for buy to let properties
Many of the country’s landlords are starting to question the fairness of the UK tax system following the introduction of tax changes in the buy-to-let market in April.

Despite the financial implications of the reforms, many landlords have not considered how they hold their interests in property and what this means for their investment. While owning property personally is simple and requires minimum fuss, for many individuals, it isn’t very tax efficient, and we are anticipating that post-tax returns on property investments could be lower under the new legislation.

Potential tax advantages
Income Tax on rental profits can be anything up to 45%, which seems a significant imbalance given that companies currently pay Corporation Tax at 20%. This already favourable rate will reduce progressively to 17% over the next four years and may even drop as low as 15% - a figure previously quoted by George Osbourne, the ex-Chancellor of the Exchequer, following the result of the EU referendum.  Therefore, if a landlord does not require rental profits on which to live, or if they are not being used to repay loan capital, establishing a private company to manage lettings portfolio starts to look attractive.

Furthermore, from 2017, loan interest will be restricted to Income Tax, but not Corporation Tax, further enhancing the appeal of the company model.

When residential properties are sold, individuals pay Capital Gains Tax (‘CGT’) of up to 28%, whereas on residential property gains, other than in limited circumstances, companies pay Corporation Tax at the lower rates mentioned above. In addition, companies are often taxed on a lower gain because they can claim an inflation allowance (known as indexation).

Shareholding and future planning
Corporate ownership allows a wide range of investors to participate as shareholders, rather than having direct interest in the properties. This also benefits Inheritance Tax planning, as assets can be passed to the next generation without having to transfer the property. For example, landlords can introduce their adult children as minority shareholders, or with generous grandparents, grandchildren can become shareholders, and dividends can be paid to them to fund school fees or other expenses, rather than grandparents paying out of their taxed revenue. Dividends can also be paid to the wider family group, which is likely to improve overall tax efficiency.

In summary, prospective and existing landlords should consider their ownership structure before making any further property purchases.

For those BTL landlords who own portfolios personally, it may be possible to move them into a new company structure; however, inadequate or poor advice could increase the risks of triggering high CGT and Stamp Duty Land Tax liabilities with no cash to settle them.

Price Bailey are a firm of chartered accountants and tax advisors who are experienced in this area, having successfully assisted clients reorganise BTL landlord property portfolios without incurring ‘dry’ CGT and SDLT charges.

Price Bailey are happy to give clients a free initial portfolio review to assess whether benefits can be had from the recent tax changes, as discussed above. Contact details can be found below.

Price Bailey Property Tax Team
Jay Sanghrajka
Partner, Head of Property
T: +44(0) 207 7382 7431

Chris Hammond
Senior Tax Consulting Manager
T: +44(0) 1223 507 632

Lisa Simon, 
Partner Head of Residential Lettings
T: 020 7518 3234 

Friday, 9 September 2016

New agri-environment agreements

Farmers and landowners need to get their skates on now the government has pledged to honour existing and new agri-environment agreements beyond the UK’s departure from the EU.

This is on condition applications to the new scheme are submitted before the Chancellor’s Autumn Statement - and the application deadline for the Countryside Stewardship Scheme is September 30.

Countryside Stewardship provides financial incentives for land managers to look after their environment through activities such as:

•    Conserving and restoring wildlife habitats
•    Flood risk management
•    Woodland creation and management
•    Reducing widespread water pollution from agriculture
•    Keeping the character of the countryside
•    Preserving features important to the history of the rural landscape
•    Encouraging educational access

The scheme is open to all eligible farmers and landowners but it is competitive with points awarded on how well the application enhances local targets to maximise environmental benefit.

There are three main elements to the scheme - the Mid Tier, Higher Tier and Capital Grants.  The Higher Tier is primarily available to those farmers who are leaving an existing Higher Level Stewardship e but the Mid Tier is of interest to farmers more widely, as is the Capital Grant scheme.

Last year was the first year of this scheme and a disappointing number of applications were received because the rules are relatively complicated and the level of financial support is lower than predecessor schemes.  However, possibly because of this, all the applications my firm submitted on behalf of clients in the South West were accepted.

In making an application obviously you must focus on the priority targets for your area and these can be found on line here.

Natural England are tasked with running the scheme and if anyone wants to find out more about it, their contact details are: Natural England, County Hall, Spetchley Road, Worcester WR5 2NP. Email enquiries@naturalengland.org.uk and phone 0300 060 3900.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

Thursday, 1 September 2016

Compensation for dairy farmers

The EU are proposing to compensate dairy farmers for cutting milk production in a bid to boost its price.
Indications are that payments of 12p/litre may be paid to farmers who commit to reducing milk production over a three-month period compared to the previous year. However funds will be limited and are likely to be paid on a first come first served basis, so farmers are advised to get prepared for the application period.

This could be a real opportunity for some farmers here because, as I reported a couple of weeks ago, milk production in the UK fell by around 10 per cent in July compared to a year ago. Some farmers will have already “pre-qualified” for this particular scheme without having to change anything.

Applications will be made to the Rural Payments Agency and will need to be accompanied by written proof of 2015 production levels which should be relatively easily achieved through the provision of last year’s milk cheques and estimated revised production levels.  

The total pot of money available across the whole of the EU will be £125m and I expect there will be four application periods until the money runs out. But with UK production having already fallen sharply, this money could be used very quickly and farmers are advised to apply at the first opportunity.

According to NFU chief dairy adviser Sian Davies: “When the application window is opens there will be a form made available on the RPA website which farmers can download ready to submit along with their milk cheques.”

It is believed the first application period will relate to reduced milk production from October 1 to December 31, 2016 and any potential applicants should consider what level of production they think they will have during that period in order to be ready to submit the form.

This EU initiative is clearly welcome but if the EU had not abolished its milk quota system in 2015, when world markets were falling in the face of rising milk supplies, perhaps the current level of overproduction in the EU would have been less severe and the latest dairy compensation scheme would be less necessary.

James Stephen MRICS FAAV
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk