Concise Rural Taxation (formerly Taxation for Students of Rural Land Management) is now an annual publication. This year’s edition is now available. Continue reading “Concise Rural Taxation 2017/17 Now Available”
A first reaction to the referendum ‘Brexit’ decision from a group of postgraduate students at Harper Adams University who have been studying Land Use and Management this week.
The 18 students have worked rapidly in small groups this morning to appraise the impact on different sectors of the rural economy, and the actions that land managers, owners and occupiers should now be considering. Here they are:
Agriculture: the issues here have been well rehearsed. What will replace the Common Agricultural Policy? If anything? On what terms will we trade with the EU, both for sales of our produce and purchase of our inputs? Is there an opportunity in this to open or develop new markets at home or abroad? One paradox is that enhanced regulation of our farming and food industry may add to the quality perception of British food once outside the EU. But our markets may then be open to genetically-modified crops, and it may be possible to accelerate the uptake of GM technology here.
Scale and efficiency look as if they will become even more important and we might expect to see small farms going to the wall and large farms getting larger. On the margins some land may switch from sheep production to forestry if there are shortfalls in support.
Knowledge for farming may take a hit: early pest and disease intelligence from continental Europe may become less accessible, and investment in research and development may fall without access to EU funding. If capital values fall, problems may in turn emerge over borrowing ratios and liquidity.
Labour availability may also limit the production of some higher value crops, even in the short term if seasonal workers choose EU destinations with longer term prospects for free movement of labour.
A wider question over the management of the industry as a whole: will the emphasis on compliance with Basic Payment requirements start to fall away, with what consequences for the wider environment of the countryside?
Land and property: Savills shares saw a 20% drop at one point, wiping £824 million off the value of the company. House builders fared worse. This points to a slow down in the rate of house construction, exacerbated by the danger of higher input costs and more difficulty in recruitment given the reliance of construction on EU workers. This in turn knocks on to the demand for development land, and its price. Farmers may still be in the market for land if they see bargains available on which they could expand, but foreign buyers are likely to hold off and investment buyers may be far less confident of their own positions given the impact on financial services. Could this be good news for new entrants? Even if land prices do drop the prospects of access to land by this route remain unrealistic. A more likely scenario is for the market to go into virtual stasis, and for prices to do no more than tick over in a narrow price band. The clear message here: only sell now if you have to. Rather than sell look at short term options like farm business tenancies.
Forestry: much of the return on investment in forestry comes in the form of capital appreciation. Will land prices wobble? A weaker pound could push up the cost of the 60% of our timber we import, in turn pushing up prices to the construction industry while stimulating demand for home grown timber Good news for foresters could be bad news for processors and end users. Although the UK Forestry Standard has a EU origin it is now embedded in UK legislation. The UK however has no planting targets but we do know that there will be severe shortages of home grown timber in 50 or 60 years due to a lack of planting now. Might changes in agricultural policy lead to the abandonment of marginal land sheep farming, making this ground available for afforestation? It’s hard to see where planting land may come from otherwise.
Forestry disease and pest control may benefit if plant health import regulations can be imposed rigorously. But this will require significant expenditure on plant health inspectors. Will this be a priority for future spending?
Renewables, energy and the environment: Many of our environmental objectives embody wider obligations than the EU alone, for example our membership of the UN, adoption of the Kyoto protocol and the outcomes of the Paris climate talks. But without pressure from fellow EU members to achieve the UK target of carbon reduction of 80% against 1990 levels by 2050, will there be sufficient pressure on the government here to make sure we stick to these obligations?
CAP Pillar 2 environmental and rural development schemes are bound to be tied up with whatever happens to domestic agricultural and environmental policy. The directives on bathing waters and birds and habitat are an EU obligation, but if we stick with the European Economic Area we will still be subject to controls on pollution, industry, energy policy, chemical safety rules and rules on product liability.
The internal energy market in the EU may also become more difficult. More agreements with specific countries are likely to be needed and the overall effect may be to increase the price of new interconnectors. Increased investment costs will in turn push energy prices up. This in turn could foster home production of renewable energy, but companies like Siemens may need to reconsider the use of the UK as a production base for the EU. The departure of major suppliers could in turn lead to price rises on kit putting further pressure on energy prices.
So: one door has closed firmly and for good. Who knows where the other doors are or what lies behind them? The outlook is still very substantially speculative beyond the short-term market reactions. The future belongs to those who will be the most vigilant and opportunistic.
Philip Meade has published a post on his Dispute Resolution blog which serves as an excellent reminder of some of the good practice surveying basics: points which are just as useful to a trainee or newly-qualified surveyor as they are to an experienced arbitrator. I’m delighted to reproduce it below:
Despite our professional roots in land surveying it is not uncommon as an arbitrator to come across valuation disputes in which the precise location and extent of the original problem is far from c…
Source: Measure for Measure
Headline points from the 2016 Budget for the rural economy and property. Get out of sugar, get into tunnelling, run a micro-business on the side, infrastructure needs you, take your capital gains now, incorporation is looking better and better unless you intend to sell your professional services to the public sector, drink whisky and beer not wine. Despite this, old age and death are beginning to look expensive.
A £3.5 bn reduction in public expenditure is not intended to dent George Osborne’s claim that, “We [ie the Conservative Government] are the builders”. Practically this means Continue reading “Budget 2016: Rural and property points”
Thank you to everybody who responded to my survey on tied housing. I have now offered the following observations in response to the HMRC consultation’s suggestion that the tax and National Insurance treatment of tied housing as a benefit in kind should be based on its full rental value.
The suggestion that all employer provided accommodation should be taxed on the basis of its full market rental value could therefore have significant implications for [rural] occupiers, many of whom are likely to be at the lower end of the pay range. This in turn is likely to lead to greater pay pressures on employers at a time when there is no sign of agricultural volatility decreasing and when those same employers are facing the additional costs of extended pension rights etc.It is also worth highlighting the contrast with Local Housing Allowance (LHA) and Housing Benefit (HB) if the proposal to move to full rental value were to go ahead. LHA and HB are both restricted according to the number of bedrooms the occupier is deemed to need and LHA is further restricted to the lower level of rent prevailing in the district. 80% of the respondents to my survey would find their entitlement restricted if they were LHA or HB claimants, yet would almost certainly find it impossible to move to alternative accommodation without changing their job.
The online survey was undertaken between Monday 4 January and Tuesday 2 February 2016 using SurveyMonkey. No attempt was made to define a particular population beyond occupiers of employer provided living accommodation generally, with attention drawn to the survey via social media (twitter, LinkedIn, charlescowap.wordpress.com) and direct approaches to contacts in the rural economy. I cannot claim that the survey is representative of a particular group, nor that the results should therefore be treated as compelling. It does however provide a persuasive insight into the housing arrangements for people employed in some sectors of the rural economy.
- Number of respondents: 25, all of whom live in accommodation provided by employers
- Twenty pay no rent for their accommodation (80%), while five pay some rent (20%). Nobody claimed to pay full market rent.
- Size of accommodation ranged from one to six or more bedrooms, Table 1
Table One: Number of bedrooms
|Number of bedrooms||Number of dwellings|
|6 or more||2|
- The twenty five dwellings were occupied by a total of 70 people, ranging from single occupiers to couples with one or more children.
- One respondent worked in education. Most respondents (n=17) worked on rural estates and seven occupiers worked in agriculture. There were no respondents from the forestry, licensed trade, security, other estate or property management or finance and banking sectors.
- Two respondents paid Income Tax or National Insurance on the value of their accommodation but the majority did not (n=19, 76%). One respondent did not wish to answer this question and a further three did not know.
The data were further analysed as to the suitability of the accommodation for the size of the family unit living there. This was done by reference to the qualifying bedroom criteria for Local Housing Allowance and Housing Benefit.
- Of the 25 households, twenty would have had their entitlement to benefit restricted due to an excessive number of bedrooms. This would have affected 58 of the 70 people covered by the survey. Examples of those excluded included:
- 10 out of 11 couples in the survey occupying property of two or more bedrooms;
- Two couples with children over 16 occupying houses with more than four bedrooms;
- Two couples with one child under 16 occupying houses with more than three bedrooms.
One respondent who had lived in employer provided accommodation offered the following observations in response to the survey:
“Having lived in service accommodation for many years I’d comment:
1 In accepting a position where I was required to live in service accommodation to meet my contractual obligations I had no choice in the location (edge of pig farm)type of housing, nearby education, or standard of maintenance and external environment
2 There is an implicit and unpaid expectation that there will be a significant and unpaid additional labour contribution – unlocking for out of hours lorries and loading/unloading, telephone, attending sick animals
3 Additional taxation of such housing as a benefit could break that relationship and would require an employer to pay more for out of hours service
4 We never thought of service accommodation as a benefit, but a liability, knowing that when job terminated we would have to move so saved and invested every penny to buy a flat first, then a house, for long term security” (Mr John Stones, former director Nuffield Farming Scholarships)
Questions 9 and 10 of the HMRC Consultation, Employer Provided Living Accommodation, Call for Evidence (January 2016) ask what proportion of employees provided with accommodation pay rent, how much rent do they pay, how is the value paid as rent calculated before going on to suggest that a move to market rental value would provide a simplification to the tax system.
The findings of this survey suggest that very few occupiers in the rural economy pay any rent at all, and that a move to full market rental value could have disproportionate effects on occupiers who have little or no choice over the size of the accommodation provided for them. A move to market rental value as the basis of taxable benefit is likely to lead to upward pressure on pay in order to compensate for the extra cost, and with this consequences for employer costs including increased National Insurance contributions.
The government is seeking evidence on the taxation of employer provided living accommodation. An explanatory document has been issued and the deadline for responses is 3 February. It is worth reading for its clear explanation and examples of just how complicated the taxation of employer provided living accommodation has become over the last forty years or so. It can be found at this link: Government consultation on employer provided living accommodation.
One particular question of the 16 caught my attention. It’s number 10, and it asks:
Do you agree that using market rental value would provide a simplification to the tax rules on provided living accommodation? How could such a system work and what would be the impacts on both employers and employees?
I wonder what the effect of this might be on rural employees who live in houses which might be considerably larger or more expensive than they would otherwise choose, or indeed than they may be able to afford? I have devised a simple survey which will allow some data to be collated if we can gather enough responses. Some of the questions ask how many people of different ages live in the accommodation. This will allow comparison with the maximum size of accommodation that would be acceptable for Local Housing Allowance purposes. Please complete the survey by the end of January and this will allow the responses to be collated in time for the government’s deadline.
This link: Accommodation Survey will take you to the survey. Thank you for your help which could be most valuable in providing evidence for the government’s review.
Rural Business and Farm Tax Update – Autumn Budget to Spring Statement
Web class Online, 15 Dec 2015
The Autumn Statement was delivered by Chancellor George Osborne on 3 December this year. This web class will be delivered two weeks after the Chancellor has published the government’s review of the economy, on Tuesday 15 December, 09.00 to 10.30 GMT
It provides an excellent opportunity to look forward to what we can expect in the 2015 Spring Budget, and to take stock of any important tax planning opportunities which should not be missed before the end of the tax year in April. In recent years the Autumn Statement has become just as important as the Budget itself, sometimes containing far more important statements concerning taxation, tax rates and the general thrust of economic policy.
Follow this link for further details. Or go to this url:
- Evaluate the impact of the Autumn Statement on farm businesses and the business structures associated with them
- Evaluate the impact of the Autumn Statement on rural estates and related enterprises
- Apply the latest rates and rules for the assessment of Income Tax, Capital Gains Tax and Inheritance Tax
- Advise on the wider economic and financial implications of current tax policy for rural estate and farm business management.
Who Should Attend
- Estate Managers
- Rural and agricultural valuers
- Farm business consultants
- Anybody whose livelihood is affected by the workings of the UK tax system.
Web Class Pre-requisites
Some familiarity with Income Tax, Capital Gains Tax, Inheritance Tax and VAT will be helpful, as well as some of the other taxes which can affect land transactions eg SDLT.