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Farming

Farmers should prepare for IHT changes

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FARMERS should review their Inheritance Tax (IHT) and succession plans ahead of the Spring Statement as potentially significant changes are expected, according to rural accountant Old Mill.
There are less than six months before the Spring Statement, and changes to the IHT format – based on recommendations originally outlined by the Office of Tax Simplification (OTS) in July 2019 – are likely. “The recommendations were primarily geared towards streamlining IHT administration but may have the secondary effect of reducing some of the favourable reliefs available to farmers,” explains Catherine Vickery, associate director at Old Mill.
“Current IHT legislation can be very beneficial for farmers, giving confidence that they can pass down agricultural business and property assets to the next generation tax free on death,” she adds. “Unfortunately, the coronavirus pandemic has left the Government with a very large debt, so there’s potential that it will implement any OTS recommendations to increase tax revenue.”
So, with the Spring Statement anticipated for March, what can farmers do to mitigate any potential changes?
“Under the existing rules, agricultural land and property qualify for Agricultural Property Relief (APR) from IHT at up to 100%,” explains Mrs Vickery. Other land and property assets, like diversified enterprises, can qualify for up to 100% Business Property Relief (BPR) as part of an overall farming business which is at least 50% trading. “These reliefs can apply on lifetime transfers as well as on death where the conditions are met.”
Transfers on death currently also qualify for Capital Gains Tax (CGT) free uplift so that gains are effectively washed out. Lifetime transfers of agricultural land, property, and businesses which are at least 80% trading qualify for gift holdover relief, meaning gains can be deferred until a later disposal.
However, a key OTS recommendation is to remove the CGT free uplift on death when IHT relief is also available. This would mean that the next generation would inherit the farm at an historically low base cost, leading to higher CGT on any future sale.
The OTS has also just released its report into CGT simplification which echoes this same recommendation.   Proposals to alter the trading test for BPR, aligning it to the 80% CGT trading test could leave farmers ineligible for 100% BPR, which could result in assets having to be sold to pay IHT liabilities.
“The most tax efficient option has often been for farmers to continue to actively farm and hold onto assets until they die,” says Mrs Vickery. “Now, given speculation about potential changes, the best course of action is to get a succession plan in place as soon as possible and start implementing it.
“Plans need to be arranged based on what is right for you, your family and the farm right now, rather than how things might stand at a later date.”
This means establishing who is taking on the assets and if they have the skills needed to drive the business forward. “Pass over this responsibility while you still can and while you can be on hand to guide and support your successor,” advises Mrs Vickery.
It’s also important to review partnership or shareholder agreements, and consider the handing on of other assets. Additionally, farmers should collate any trust and gift deeds, so that paperwork is on hand to be reviewed.
“Though we suspect the new IHT rules won’t be favourable, farmers need to make use of the rules we have now as these are a current certainty,” says Mrs Vickery. “Succession planning is so easy to put off but it’s a vital tool in safeguarding the future of farming businesses.”

 

Farming

Check ewes at weaning to protect next season’s lamb crop

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PEMBROKESHIRE sheep farmers are being urged to use weaning as a key opportunity to check ewe condition and deal with any problems before tupping.

With many local flocks now moving towards weaning, farmers are being advised to assess body condition score, as well as checking teeth, feet and udders, while there is still time to improve nutrition ahead of the breeding season.

Dr Alison Bond, Technical Services Manager at Rumenco, said close monitoring at this stage can help avoid major changes in ewe condition and improve overall flock productivity.

She said weaning at around 12 weeks was a good target, when lambs should usually be between 25kg and 30kg and taking very little milk from the ewe.

“There will of course be a focus on the lambs’ readiness for market at this stage, but it is equally important to put a hand across the ewes to assess their condition,” she said.

For lowland flocks, ewes with a body condition score below 2.5 at weaning should be given priority, as they may struggle to reach the target score of around 3.5 by tupping.

Those poorer condition ewes should be grouped separately, moved onto the best available grazing and given appropriate supplementary feeding where needed.

Dr Bond said waiting until closer to tupping could be less effective and may affect performance.

She added that ewes in good condition at tupping are more likely to scan with more lambs, produce healthier lambs after birth, and rear heavier lambs by eight weeks of age.

“It affects the whole production cycle, and not just one element,” she said.

The advice will be particularly relevant to farms across Pembrokeshire, Carmarthenshire and Ceredigion, where sheep remain a major part of the rural economy and where grass quality can vary sharply depending on weather, soil type and stocking pressure.

Dr Bond said the aim should be to keep ewes between body condition score 2.5 and 3.5 throughout the cycle, avoiding big dips and peaks.

Routine checks at weaning, she said, give farmers the best chance of correcting problems before the tups go in two to three months later.

Pic: Farmers are being urged to check ewe condition at weaning to protect flock performance ahead of tupping (Pic: Tim Scrivener/Agriphoto).

 

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Farming

Reform calls for urgent review of farming scheme

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LOW UPTAKE HAS RAISED FRESH QUESTIONS OVER THE FUTURE OF SUPPORT FOR WELSH FARMERS

REFORM WALES has called for an urgent review of the Sustainable Farming Scheme after figures showed only around half of eligible farmers have signed up.

The party said the lower-than-expected uptake showed that serious concerns remained within the farming community over the complexity of the scheme, compliance rules and uncertainty about how it will operate in the long term.

Laura Anne Jones MS, Reform Wales’ Shadow Cabinet Minister for Food, Farming and Rural Affairs, raised the issue during questions to the Welsh Government.

She said: “The figures released by the Welsh Government today confirm what many farmers have been saying for some time: the Sustainable Farming Scheme is too complex, too restrictive and too bureaucratic.

“Farmers need certainty and security, not endless paperwork and rigid requirements that fail to reflect the realities of farming in Wales.

“Reform Wales believes the scheme should be reviewed as a matter of urgency, with a greater focus on flexibility, common sense and practical outcomes.

“Welsh farmers deserve a scheme that works with them, not against them.”

The Sustainable Farming Scheme is due to replace previous systems of agricultural support in Wales and has been one of the most contentious issues facing the rural sector.

Farming unions and campaigners have repeatedly warned that any new system must be practical for family farms and must not add unnecessary red tape at a time when many businesses are already under pressure from rising costs, bovine TB and market uncertainty.

Reform Wales said the Welsh Government must now explain how it intends to respond to the level of take-up and whether changes will be made before the scheme is fully rolled out.

 

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Business

Holiday accommodation conversion of historic farm buildings approved

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PLANS to convert historic farm buildings near north Pembrokeshire’s Whitesands beach for use as holiday accommodation have been given the go-ahead, but their use doesn’t have to be restricted to just that purpose.

In an application to Pembrokeshire Coast National Park, Matthew James of James Properties, through agent Harries Planning Design Management sought permission for the conversion of two derelict barns to two self-catering holiday accommodation units at Porthmawr Ganol, Whitesands, St Davids.

An officer report said: “The farmstead occupies a prominent position within a landscape characterised by open agricultural fields enclosed predominantly by traditional dry-stone walls, exposed coastal pasture and areas of heathland associated with Carn Llidi.”

It added: “The site lies within the Porthmawr Historic Landscape Character Area, an area recognised for its historic pattern of dispersed settlement, traditional farmsteads, dry-stone wall field boundaries and evidence of medieval and post-medieval agricultural activity.

“The retention and reuse of the existing buildings therefore has the potential to preserve an important element of the area’s historic landscape character whilst securing a viable long-term future for structures that would otherwise continue to deteriorate.”

It said that insufficient evidence had initially been submitted to demonstrate that the buildings were unsuitable for permanent residential conversion and only for self-catering accommodation and therefore an affordable housing contribution should be secured.

Policy would lead to a contribution of £36,400, the report said, but a financial viability assessment by the applicant “demonstrated that the development would not be viable if required to provide the full policy contribution,” the maximum contribution capable of being supported whilst maintaining viability was £12,641.

This reduced figure was accepted, the officer report saying: “Whilst this represents a reduced contribution when compared with the full policy requirement, the submitted viability evidence demonstrates that the development could not reasonably support the full contribution whilst remaining deliverable.

“In these circumstances, securing a reduced contribution is considered preferable to losing the opportunity to secure the restoration and beneficial reuse of the historic buildings.”

It stated that, with the affordable contribution, the scheme would not be limited to self-catering development only.

The application was conditionally approved by Park planners.

 

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