Diversify to maximise the performance of assets

Owners of rural land and property are advised to diversify to maximise the performance of their assets.

This is highlighted in Carter Jonas’ latest Model Estate report which since 2010 has tracked the annual performance of a notional agricultural estate against seven other asset classes, including residential property, commercial property, classic cars, fine wine, equities, antiques and gold.

The Model Estate showed a 4.7 per cent increase in value during 2015 which means the estate’s rank slipped to fourth place in the eight asset classes.

The let farms element of the Model Estate produced a return of just 4.2 per cent in 2015 compared with 24.3 per cent in the previous year. Growth in 2015 was driven by capital rather than rental values, although even this slowed as the agricultural land market began to cool over the course of the year.

Tim Jones, national head of the rural division at Carter Jonas said: “Net incomes, profitability and the serviceability of debt continue to be squeezed, and farmers are increasingly cautious about paying premium rental prices.

“While demand remains for tenanted large blocks of land, we have seen market rents plateau over the last 12 months, in part due to falling commodity prices. These combined factors have caused the decrease in 2015 total returns for the let farms element of the estate, when compared with the previous year.”

The Model Estate’s residential portfolio recorded a 20.7 per cent increase in value which was boosted by one-off capital gains rather than just house price or rent increases. This gain is largely attributed to the decision to convert a commercial property to residential by taking advantage of the new permitted development rights. 

This supports the notion that in order to maximise the value of rural property, landowners need to be alert to any opportunities that may arise and in recent times exploiting the relaxation of planning laws has certainly been something to keep an eye on. The potential to convert offices and farm buildings to residential use are very often the obvious diversification opportunities to consider.

Of the eight asset classes the Model Estate is analysed against, classic cars once again produced the highest return in 2015, of 16.6 per cent. This was followed by the UK’s residential sector which produced a total return of 9.5 per cent and then the commercial, recording a 7.2 per cent return.

As head of Carter Jonas’ rural team in the South West I can confirm these research findings are reflected in real life as owners of farms and rural estates look to generate alternative sources of income to augment their traditional income generated from let and in-hand farmland.    

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Tax reliefs for farmers

Accountants are always advising farmers to manage their affairs carefully so as to be able to take full advantage of the potentially generous reliefs which may be available to them under the Inheritance Tax (IHT) regime.

However, according to Catherine Desmond of accountants Saffery Champness, the National Audit Office (NAO) is launching an investigation in to the misuse of Agricultural Property Relief (APR) and Business Property Relief (BPR), both of which are very important reliefs available to farmers which can reduce or potentially illuminate the need to pay IHT on death. But with an impending investigation by the NAO it seems inevitable that claims for such reliefs will be brought under ever increasing scrutiny.

Accordingly farmers are advised to review their farming business regularly to ensure any changes in farming structure, ownership or occupation do not impact on their potential tax liability.

For example recent changes in planning regulations may encourage some farmers to argue buildings are no longer in agricultural use but the flip side of that coin will be that the Revenue may look to claim such buildings have a value on which reliefs may not be available.

Similarly we will all have seen Solar Parks and other renewable energy projects popping up all over the place and it may be that these developments will change the IHT status of the land and possibly the wider farming business depending upon the scale of the project. Further, another popular device used by landowners, who want to be seen to be farming rather than letting land for IHT purposes, is a contract farming agreement whereby the landowner employs a third party to carry out the farming operations on their behalf. In simple terms arrangement involves the landowner/farmer paying for all inputs over and above the contractor’s charges and then the landowner/farmer benefits from the profits, or losses generated once the crop or other produce has been sold.

This exposes the landowner to the true risk of running a farm but in many cases, although the written agreement may be satisfactory, the reality on the ground may be very different with the contractor effectively “farming” the land while the landowner receives a payment which is more akin to a rent than profit. Such an arrangement may fall foul of scrutiny by the Revenue which could be very costly if this resulted in the value of the land being taxed at 40% rather than receiving 100% relief from tax under either APR or BPR rules.

So the message is that farmers who are growing older should sit down with the family and their trusted professional advisors to ensure they take advantage of any tax reliefs that may be available or are at the very least are appraised of the potential IHT liability if they were to die in a relatively short period of time.

This all seems quite sensible but very often families do not want to discuss the inevitable for one reason or another or professional fees are perceived to be too high and as a result such discussions may not take place until it is too late which in the worst case scenario may jeopardise the future of a family farm.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Moving Businesses Forward into the Digital Age

Last week saw the opening of the Rural Payments Agency’s (RPA’s) online facility for applying to the 2014 Single Payment Scheme (SPS). In an attempt to encourage many more farmers to apply online as opposed to submitting paper forms, more than 40,000 farmers, landowners and agents across England should already have received postcards, promoting “SPS Online”.

Having used the system myself I can certainly vouch for its simplicity and it helps prevent applicants making silly mistakes but perhaps the most useful aspect is the fact that one can be certain the form has been successfully submitted which was not always the case when relying on the postal system. However, one must not be hoodwinked by the “simplicity” because the form still needs to be checked to ensure the correct fields are shown and to deal with any necessary amendments.

The RPA Operations Director, Paul Caldwell said: “The RPA is one of the leading agencies in delivering online facilities, and has worked hard to provide a number of schemes including the highly praised SPS Online. The first wave of contact (the postcard) is part of the Agency’s ongoing drive to help farmers, landowners and agents move their businesses forward into the digital age.”

As a consequence of this drive, local drop-in centres are no longer available to help farmers with any queries that they might have about their entitlements or the application process, so former users will be among those who will get offers of help from the RPA.

To use SPS Online for the first time, claimants must first register on the Government Gateway’s website; www.gateway.gov.uk . However a word of warning is being expressed because some farmers are receiving a bogus email from gateway.confirmation@gateway.gov.uk informing them that the RPA has not been able to process their claim. The email also has an attachment that contains a virus and so the RPA’s advice is to not respond to the email and to delete it immediately.

This sort of scam highlights some of the dangers of the digital age that the Government and its Agencies are keen for us to embrace and will serve to make those who are already nervous about submitting such important information online, even more so.

A certain amount of caution is always needed when using any system online but with care, even an “digital luddite” like me can see the advantages will certainly outweigh the disadvantages.

If any farmers would like to know more about applying for and submitting their Single Payment Scheme applications online they can contact Carter Jonas’ Rural Team on 01749 683381.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk

Hot topic: Housing in rural areas

The provision of housing in rural areas in particular is always a controversial topic; landowners are often eager to see development on the edge of a village so they can profit from the development value of the land while neighbouring householders very often don’t want development “in their back yard”.

This can lead to prolonged and expensive planning applications and one of the tactics used by those protesting against development is to try to get the land which is the subject of the planning application allocated as a “Village Green”. Very many such applications appear to be spurious, but the cost of defending such a claim can be enormous and the claim may ultimately frustrate a development altogether.

However, this tactic has been recognised by government as not being in the wider public interest and they have amended the law accordingly. Thus under the Growth and Infrastructure Act 2013 landowners can now proactively protect their land prior to making a planning application so as to avoid a subsequent “Village Green” application.

The process involves the landowner depositing a statement and map with the commons registration authority (the County Council), effectively bringing to an end any period of use “as of right” for lawful sports and past times on the land to which the statement relates. The deposit of the statement will not prevent the start of a new period of recreational use as of right, but the landowner may deposit further statements to interrupt future periods of use.

This extends the protection which is already afforded to landowners in relation to linear public rights of way where a similar deposit can be made under the S31(6) of the Highways Act 1980 whereby the landowner can register those rights which exist so as to prevent new rights of way being inadvertently created.

So, if you are a landowner and wish to protect your land against a “Village Green” application or claim for a new public right of way it is suggested you should look in to depositing the appropriate statements and plans now because the relatively modest upfront cost of doing so could save you or your family a huge sum of money in the future.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells
T: 01749 683381
E: james.stephen@carterjonas.co.uk