Trustees and beneficiaries of rural estates: what you need to know and do

Many rural estates are held in trust, generally for reasons of long-term asset protection and security. Trustees carry a heavy burden of responsibility – heavier typically than a company director or shareholder. This online seminar will focus on the legal basis of these responsibilities and the practical measures through which they can be discharged. Essential learning for trustees, beneficiaries and all those – especially from the non-legal professions – who advise them or work for rural and other estates held in trust. The focus is on private family trusts although much of the material is equally relevant to charitable trustees.

This online seminar is the second in our new series for 2018.  Booking and other details can be found here.

Feedback on our first online seminar, on the General Data Protection Regulation, was excellent.  Seventy-two percent of respondents rated it 5/5 and the remaining 28% as four out of five.  Individual comments about the benefits of this approach were:

  • Concise yet informative
  • Simplicity and clarity
  • Clear presentation
  • Clear content, good discussion and engagement with questions
  • Good to follow clear and concise
  • Simple language!
  • Still in office but good interaction with other professionals
  • Ease of obtaining answers to specific questions.
  • Extremely useful overview covering the salient points to note and act on
  • Easy access to ask questions – smallish group
  • Succinct and relevant

Our current programme for the full year can be seen here.

And finally, a question: our first seminar on the General Data Protection Regulation which comes into effect on 25 May 2018 highlighted a lot of issues for rural property professionals and land managers.  Would you like another chance to catch up with this?  If so please let us know below.  If there’s enough interest we’ll see if we can run it again.

Advertisements

Twenty-five year Environment Plan

First thoughts on today’s 25 year Environment Plan?  Confirmation of the direction of travel we have seen since the Natural Environment White Paper of 2011: The Natural Choice: securing the Value of Nature

The headline points for farmers and land managers: Continue reading “Twenty-five year Environment Plan”

Twenty-five year Environment Plan

The Natural Capital Committee has reported its recommendations for a 25-year Environment Plan.  There are five key sections to this important report:

  1. Vision, ambition and goals
  2. Investment needs
  3. Milestones
  4. Governance
  5. Agricultural subsidies post-Brexit

Twelve goals are offered; these include:

  • Breathable air that achieves international standards;
  • Flood protection by various means including natural flood management to protect everybody against a 0.5% probability of flooding:
  • All inland water to be of good status, and coastal waters all to be good for bathing;
  • Greenhouse gas emissions conforming to international targets, including emissions from land-based activities
  • Access to local greenspace and open recreation for all.  The following goals are suggested:
    • One hectare of local nature reserve per 1,000 people;
    • Two hectares of natural greenspace within 300 m of every home;
    • A 20 ha greenspace within 2 km of every home
    • No suggestion is made that the effect of this has been modelled and compared with the current state of provision.

Turning to investments the report proposes 11 items and these include:

  • 250,000 ha of woodland by 2040;
  • All peat to be in favourable condition;
  • Restoration of hydrological cycles including channel restoration and natural flood management measures;
  • New National Parks (no suggestions as to where);
  • Farm funding to be limited to public goods and high welfare standards;
  • Working closely with Local Nature Partnerships;
  • Developer contributions via planning etc to be pooled for natural capital investment;
  • An enhanced capacity for citizen action and involvement;
  • Natural Capital Net Gain principle which would apply to planning, environmental regulation and public procurement wherever possible;
  • Despite being referred to as investments, none of these are funded or compared with the status quo.

Five year milestones are proposed, which need to be supported by a natural capital risk register; accounting measures; cost benefit appraisal approaches and natural capital balance sheets.  Pp 8 and 9 of the report make particular mention of the private sector in this respect but do not expand on this point.

It is proposed that there should be a State of the Environment Report by 2019 and that this should be updated regularly.  For governance the committee propose that the 25 year Environment Plan should be placed on a statutory footing under the authority of a single organisation, with a separate independent body on the lines of the National Audit Office to report regularly on progress.

The final section is concerned with agricultural policy and is perhaps the vaguest part of the report.  Much is made of the examples of market orientated projects like South West Water’s involvement in Upstream Thinking.  Although the report claims that several water companies are involved in such schemes, this is the only example to be cited.  There are indeed other examples and it is a shame that the report does not address more fully the challenges in developing new thinking in this area compared with its more defined focus in earlier sections.

Perhaps on the other hand however, this should be welcomed by those of us who have spent a lifetime involved in day to day management of rural estates and farms as an opportunity still to bring practical common sense and hard-earned local knowledge to further deliberations on these matters.

This provides the perfect opportunity to finish on an event being organised by the Ecosystem Knowledge Network with the Tatton Estate and the Country Land and Business Association on Natural Capital for Rural Estate Professionals at the end of October.  The latest report from the Natural Capital Committee is an important step forward in defining our rural future – do come and join us to see how this might begin to look on the ground.

 

Natural Capital for rural estate professionals: Cheshire, 31 October 2017

This half day workshop is aimed at rural estate owners, managers and their professional advisers. Our purpose is to look at practical ways in which we can work with current policy and technical thinking about natural capital and ecosystem services. We will hear about some tools that are available to help and will look at a practical case study based on a real private commercial rural estate.

You should end the day with an enhanced understanding of the latest developments in this area and some insights that you can start to apply to your own estates and land. You will also have the opportunity to provide feedback on what you have heard and what you think is needed.

This opportunity is the first of its kind to address these issues from the perspective of a private sector landowner and manager. It is important as we see high level advice to government and future public policy beginning to develop around the natural capital concept.

Programme to include:
• Overview of current issues in rural estate management
• An introduction to tools for scoping, mapping and valuing the benefits of natural capital
• Presentations from tool developers Viridian Logic • The Land App • NaturEtrade
• Small group discussion around a practical example (based on the Tatton Estate with the support of Tatton Estate Management – the largest privately-held estate in East Cheshire)

Organised in collaboration with the CLA, Oxford University, Natural Environment Research Council, Charles Cowap and the Ecosystems Knowledge Network.

Members of the RICS, CLA, CAAV, academics and employees of not for profit organisations can benefit from a discounted admission price.

http://ecosystemsknowledge.net/events/tatton

Registration from 10.45 for an 11.15 start; event closes at 16.30 hrs. RICS Structured CPD hours = up to 5 hrs 15 mins plus further reading etc as appropriate.

Event flyer here

Farming tax breaks: true or false

Saturday’s BC Radio 4 Today programme broadcast an interview with Prof Dieter Helm, the economist who chairs the government’s Natural Capital Committee.  Prof Helm made some cogent points about the ad hoc development of various policies for the agricultural industry, calling farmers subsidy junkies along the way and highlighting ‘exemptions’ from tax.  He particularly mentioned Diesel, Rates and Inheritance Tax.  But is Prof Helm right?  Are farmers treated any differently than the rest of us?

Diesel.  Farmers use so-called Red Diesel in their tractors and other land machinery.  It is red because it has been stained to distinguish it from diesel on which petroleum duties are levied (often called DERV – Diesel Oil for Road Vehicles, Diesel Engined Road Vehicles).  Red diesel is also called Gas Oil.  Farmers must use DERV in vehicles which must travel on public roads a lot for example pick-up trucks, or tractors used extensively on the public road.  Other industries that use diesel engines off the public road also use red diesel, notably the construction industry, quarrying and rail transport.  Boats with diesel engines also use red diesel, whether for commercial or leisure operations.  Customs Officers are regularly to be found at agricultural markets and country shows ‘dipping’ vehicle tanks for the tell-tale red stain.  So no difference here from other industries: we all pay more fuel tax on vehicles which go on the public road but don’t have to pay it on off-road vehicles.  VAT is also payable on fuel and in this respect the farming industry is also no different from other industries.  As an aside, landowners who do not farm are generally unable to reclaim VAT.

Rates:  Farming has been exempt from the general property rate since the 1930’s.  The history of agricultural rating goes back further to the 19th century when farm land was generally subject to a reduced rate.  It is however little known that about 11% of the land area of England and Wales is subject to a rate on farmland, in the form of the rates levied in the Internal Drainage Districts.  These are used to pay for the upkeep of local drainage systems which benefit farmland and other properties in the areas concerned.  Like the rest of us, farmers pay Council Tax on their houses.

Inheritance Tax: Farmers may benefit from Agricultural Property Relief on the value of most of the farm when they die.  For an owner-occupier who satisfies the rules the rate of relief is 100% of the agricultural value of the property, which in practice can be less than its full market value.  So a special concession for farming?  Well no not really.  Other businesses (and indeed farming businesses on their other assets) also qualify for Business Property Relief.  This relief is also set at 100% for most cases and is given against the market value of all the assets used in the business.  The idea behind both reliefs is to keep capital in the business.  For sure, agricultural landowners can also claim a variety of agricultural property relief but the radio remarks were about farmers not landowners.

Business Property Relief has some further surprises.  For example many of the shares quoted on the Alternative Investment Market (AIM) also qualify for 100% Business Property Relief.  Furthermore the income from those same shares is taxed at lower rates of Income Tax than earned income including trade profits: the first £5,000 of dividends are free of any Income Tax, basic rate income tax is levied at 7.5% instead of 20%; higher rate at 32.5% instead of 40% and additional at 38.1% compared with 45%.  Grateful thanks indeed for investors who are willing to invest some capital in AIM stocks and wait for the income and gains to roll in (while of course accepting the risks of losses).

To highlight the comparison, consider £5 million invested in a farm, another business or AIM stocks and shares.  In each case the combination of reliefs could reduce the taxable value of this investment for Inheritance Tax purposes to zero.  Along the way the owner of the shares will pay less Income Tax per pound than either the businessman or the farmer, whose tax bill will be broadly similar at similar levels of profit.  The farmer’s return on his £5 million is however, likely to be considerably lower than either the share owner or the businessman, with or without subsidies.

The interview on Radio Four can be heard at this link for the next 29 days.  It starts at 1 hr 10:03 mins and finishes at 1:20:50.   It’s fairly characteristic of the uninformed and poor insight shown into questions of rural, farming and food policy shown by so much of our public media.  John Humphrys and Radio 4 really should be able to do better, even in just 10 minutes.

–ooOoo–

A few copies of Concise Rural Taxation 2016/17 are still available for any reader whose appetite has been whetted for rural taxation.  See the separate tab for order details, or wait until the autumn for the next edition.

Smallholdings: State of the Nation

The county smallholdings estate is generating an operating surplus of £16.1 million from more than 2,500 farms covering an area of 86,700 hectares let as smallholdings.  In the words of the report from which these data are taken:

Whilst the data set is incomplete this report indicates that council farms continue to play an important role in the tenanted agricultural sector across England covering approximately 86,700 hectares of agricultural land providing approximately 2,583 holdings for around 2,081 tenant farmers. About sixty percent of the lettings are equipped farms (1,536 equipped holdings) and 49 lettings were made to new entrants during 2015/16. The report shows that the reporting smallholding authorities generated a revenue account net surplus of just over £9.5 million in 2015/16.

What more can be gleaned from the 66th Annual Smallholdings Report from Defra? Continue reading “Smallholdings: State of the Nation”

Rural Proofing: a key reference for rural activists and analysts

Rural analysts and activists take note.  Defra has updated its rural proofing guidance this week.  This will be a key reference for anybody interested in the development and impact of policies which affect rural areas.  Why?

Because policy measures are meant to have been ‘rural proofed’.  So the criteria for rural proofing are important because they provide a framework for the independent evaluation of rural impact.  They are also therefore a sound basis on which to challenge measures which may adversely affect rural economic, social and environmental interests, or to promote measures which will support these interests.

The Defra guidance tells us:

Thriving rural communities are vital to the English economy. A fifth of us live in rural areas and they are home to a quarter of England’s businesses, and generate 16.5% of the English economy. Rural areas face particular challenges around distance, sparsity and demography and it is important that government policies consider these properly.
Rural proofing is about understanding the impacts of policies in rural areas. It ensures that these areas receive fair and equitable policy outcomes. This guidance sets out a four- stage process to achieve this objective.

Figure One of the Defra Guidance offers this four stage process for rural-proofing:

Rural Proofing Process

The Guidance goes on to suggest this way to assess rural impact:

Rural Impact How to Assess

Worth a look for anybody concerned with rural policy and development nationally, regionally or locally.