At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:

“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”

Francis Clark LLP, National Auditor of the Year – Mid Tier 2011

Tax Planning for Landed Estates

John Endacott

Tax Partner

Field of play

• Business or pleasure, sir

• Tax changes

• Case law developments

• All about structuring activities

Wealth taxes debate

• 50% tax rate

• Mansion tax

• Wealth tax

• Large property holdings?

• Trusts?

Business property relief - background

• Business or interest in a business

• No relief where business wholly or mainly making or holding investments

• No relief for investment businesses

• Hybrid business – all or nothing test

To Farmer and beyond

• FA 1976

• Caravan cases

• Factors considered in Farmer– Capital employed

– Time spent by employees and consultants

– Levels of turnover

– Net profit figures

– Overall context of business

• Historical use of properties

Balfour case

• Brief facts– 2,000 acres

– In-hand and let farming, residential and commercial lets, grazing forestry, private water supply and shooting

– Life renter under Scottish law

• Composite nature of activities

• General assessment and impression

Points to look at

• Bring farms back in hand?

• Share farming

• Farmer/Balfour – 8 year period considered

• Presentation of accounts

• Planning and s 106 issues

• Keep your options open

Other activities

• Woodland– Ancillary to agriculture, or – Commercial exploitation

• Any trades connected with woodland

• Sporting rights• Shooting• Fishing

• Business or pleasure?

BPR – Story so far

• No relief where only activity is rental income

• Good record keeping and accountancy advice required

• No single factor is determinative

• Consider restructuring

• Can Balfour make it worse?

Farmhouses – agricultural property relief

• IHTA 1984, s 115(3)

• “Ancillary”

• “Character appropriate”

• Antrobus 1 & 2

• Starke, Dixon, Higginson, Rosser & McKenna

Farmhouses – Golding case

• 16.29 acres

• Farmed since 1945

• 3 bedrooms (no electric)/downstairs bathroom

• “Poor state of repair”/“dilapidated”

• Farmhouse as not good enough to be a domestic residence

Forthcoming changes - losses

• Losses condoc

– Capital allowances

– Agricultural connection

• £25,000 cap

• Restriction of losses likely

Forthcoming changes – capital allowances

• Reductions in capital allowances

• R & C Brief 3/10

• Capital allowances and FITs - condoc

• Integral features– CAA 2001, s 198– Mandatory pooling

– More anti-avoidance

• Retrospective claims

Furnished holiday lettings – the interesting stuff

• Property letting or trading

• New day count tests

• Capital allowances

• Ring-fenced losses

Furnished holiday lettings – trading?

• Occupation on site

• Services provided

• Case law

• HMRC guidance

• Losses

• Business property relief

Furnished holiday lettings – day count tests

• 105/210 days from April 2012

• Averaging

• Period of grace

• Genuine intention to let/commercial

• Watch planning restrictions

Furnished holiday lettings – capital allowances

• Dwelling houses

• Curtilage of properties

• Integral features

• CAA 2001, s 13B

Furnished holiday lettings – ring-fenced losses

• Restriction of losses

• Only other furnished holiday lettings

• Plan expenditure carefully

• Losses condoc

Don’t shoot the messenger

• Is it a separate trading activity?

• Property trading or exempt (woodlands) income?

• Be careful over private expenditure

• Commercial activity – use of losses

• Benefit in kind issues for farming/estate companies

The PAYE game

• Casual beaters (PAYE Manual 23015)

• Tips paid to gamekeepers

• Gamekeeper – benefits in kind

– Living accommodation

– Vehicles

– Clothing, licences and gundogs

• PSAs

• Company owners

Shooting - non-domestic rates

• Not farming/agriculture

• Business rates are payable

• 28 day planning rule on change of use

• Get specialist advice

Shooting - VAT issues

• Is it a commercial activity?

• Standard and zero-rated supplies

• Barter transactions

• VAT registration threshold

• Business splitting

• Private expenditure

Shooting at the courts

• Rt Hon Lord Fisher

• R F Bailey (t/a Llancillo Hall Farm)

• J O Williams

• Thimbleby Farms Ltd

• E G Harrison

VAT – disaggregation of businesses

• Forster case

• B&B and farm

• Were the two businesses sufficiently at arm’s length?

• HMRC direction overturned

Summary of points

• More property taxation coming

• Carefully structure activities

• Think about the activities

• Be consistent

• Better news on farmhouses

• Long term planning essential

Disclaimer & Copyright

(c) copyright Francis Clark LLP, 2010

You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically,publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of)these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained priorwritten consent from Francis Clark LLP to do so and entered into a licence.

To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions(including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided byFrancis Clark LLP.

These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis ClarkLLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilstFrancis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we donot warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we committo ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free.

Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protectedmaterial is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales.

These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business asamended from time to time, a copy of which is available on request.

Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for anydirect, indirect or consequential loss or damage arising in connection with these materials and / or any services provided byFrancis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts,business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury causedby our negligence, or for any other liability is not excluded or limited.