15 October 2018
Jack Sharpe, Senior Surveyor with Carter Jonas, has guest authored our rural blog this week. Here he discusses with our rural specialist Tim Maris the benefits that can arise from undertaking a formal valuation of your land and assets.
Rural valuations were once determined by the productivity of a parcel of land, what it produced and its subsequent return on investment. Today, of course, in a financial climate so predicated on borrowing and lending, the value of land and property is often determined by what your bank thinks it is worth.
Time and again, clients – old and new – purport to know the value of their land, but question the benefits of obtaining a formal valuation, given the hassle, time and cost involved. However, what if their assessment is miscalculated? Instinct and comparative values can only take you so far, and the implications for inaccuracies could certainly cost you.
When it comes to tax, the complications and intricacies are such that many clients baulk at its very mention. However, we have been working with UHY Hacker Young on tax planning for a number of clients, for which an up to date valuation has proved crucial.
“The benefits of having a full comprehension of your assets and their classification is fundamental when it comes to taxation,” comments Tim Maris, Partner at UHY Hacker Young. “As many farming businesses diversify, and assets are harnessed to maximise profits, we often find that assets have undergone a change of use. This could have repercussions for tax relief, and the legalities surrounding whether it applies.
“A common pitfall in the tax industry is to see a lack of distinction between agricultural and non-agricultural property, which can prove costly on the application of Agricultural Property Relief for Inheritance Tax (IHT) purposes.
“In addition, there is often an assumption that business property relief (BPR), will relieve in full the qualifying asset’s value above the agricultural value for IHT purposes. In reality, qualifying assets held outside of the business structure may be restricted to 50% BPR, compared to 100% BPR if held within the business structure.
“Steps can be taken to improve the level of BPR available, and a formal valuation is an ideal opportunity to reconsider the assets, their use within the business, and who owns them. It also enables proactive business and tax planning, to ensure you aren’t missing a trick,” Tim concludes.
Often, tax and succession planning are inextricable.
From a practical perspective, when it comes to inheritance assets, having a formal valuation can kick-start the round table discussions that are required between the relevant individuals. Indeed, very often, we find that such formal valuations unlock opportunities.
A case in point, having a formal valuation recently enabled us to identify a strategic development opportunity for a client, which has resulted in the successful negotiations of an option and separately a promotion agreement. A significant – and very welcome – windfall is set to follow, subject to planning permission. Moreover, this isn’t a one-off; it is a scenario we see often.
It goes without saying that regular land and property valuations are beneficial, but it’s important to work with firms who take the hassle out of the process. Consult the experts, trust word of mouth recommendations, and peace of mind will ensue.
To discuss your requirements further please contact Tim Maris or Jack Sharpe, Carter Jonas, on 01223 326814.