20 March 2017
Finance Act 2016 introduced new rules on transactions in land, which replaced their previous incarnation. The new rules are an entirely new set of provisions which include widely drafted anti-enveloping and anti-fragmentation rules, which apply wherever UK property is held and an intention to sell exists.
The new rules were initially seen as introduced to combat offshore structures being used to hold UK property and so to reduce or even eliminate any UK tax payable in respect of UK property development profits. However, the rules are so widely drawn that they will apply to UK companies and individuals just as much as non-resident ones and so become relevant to anyone with an interest in the sale or development of UK property.
The main thrust of these rules is to potentially turn capital profits into income profits and so expose the profit to a higher rate of tax.
Farmers are generally seen as being asset rich but cash poor as they most probably have a land portfolio which whilst generating income may generate more if part of it is developed, for example.
These new rules may very well bite and the farmer may end up with a larger tax liability than at first intended/considered if he cannot show that his intentions for the land have not changed. It is imperative now that advice is taken early and documentation put in place at the right time to disclose discussions and intentions, to protect against an HMRC raid on those profits.
For further information on any of the above, or to discuss your specific circumstances, please contact me or your usual UHY adviser. Alternatively, to read more on our services to the rural sector please click here, or to read more rural blog posts please click here.
