£1 million party to celebrate Agincourt: Don’t take the budget too seriously

A few headline points for the rural economy from today’s budget, to add to the mainstream reporting:

  1. Deeds of variation for Inheritance Tax: a consultation is to report by Autumn.  It is therefore important to pursue any deeds of variation which may be needed straightaway, and to review wills to ensure that deeds of variation will not be required.  Their days may now be numbered.
  2. No more tax returns: sounds good, but will digital tax accounts be any better?
  3. Annual Investment Allowance.  It won’t come down from £500,000 to £25,000 after December this year.  We will be told in the Autumn statement what the new rate will be.  This timing is more appropriate, says Osborne.  Two months’ notice?  More appropriate? So much for a long term view on business investment needs.
  4. Compulsory Purchase Reform/Review: consultation now issued, responses by June this year.  First impression: more tinkering, much like the story of piecemeal reforms since the Land Compensation Act 1973.  Key points seem to include earlier payment of compensation (ahead of entry); better compensation; more encouragement to pay ‘over the odds’ to avoid other problems in the acquisition process; reconsideration of the ‘material detriment’ provisions.  There doesn’t seem to be much on blight, either statutory or discretionary and more generally on the interests of property owners and occupiers who lose no land but whose interests are badly affected by public development.
  5. Local Enterprise Partnerships and Forestry: who will LEPS be forced to marry next at the muzzle of a shotgun?  £1 million for for forestry schemes which are brought forward with LEP support – not one to hold your breath for.
  6. Rural broadband (an interesting concept): a universal service obligation of 5 Mbps everywhere may facilitate satellite access.  Details are far from clear, but vital to the successful delivery of this.
  7. Farmers’ profit averaging: the averaging period extended from two years to five year with effect from April 2016.  How will this work?  We don’t know yet: consultation is to follow.
  8. Flood Defence Relief: for expenditure against Income Tax or Corporation Tax – an interesting possibility to consider in the context of the development of ecosystem services.  For example Farmer A will manage his riverside fields to accept surplus water in order to protect Manufacturer B’s factory.  Will B be able to get tax relief for the money he pays to Farmer A for this purpose?
  9. Subletting within residential tenancies: needs thinking through but apparently tenants may be able to override restrictions in their leases.  Form an orderly queue ….
  10. CGT Entrepreneurs’ Relief: various loose ends to be tightened up.  An ideal headline for scaremongering but unlikely to be of concern to ‘genuine’ cases.

How seriously should we take all this?  Paddy Power are offering the following odds on the next government:

  • Labour minority 3/11
  • Conservative minority 7/2
  • Conservative majority 9/2
  • Labour SNP Coalition, and Conservative Lib Dem coalition 5/1

Whoever wins there will be another budget early in the new Parliament.  That’s really the one to watch for rather than today’s dying embers.  Let’s hope the big Agincourt party survives the general election – never mind the charisma of Henry IV’s speech (as Shakespeare would have it anyway) but do remember the skill and discipline of the English and Welsh archers.  Could this be George Osborne’s silent blow against UKIP?

Estates Gazette Rural View: Christmas Reading

I have been writing a quarterly column for the Estates Gazette since 2013 called Rural View.  This year’s articles have covered Water, Forestry, Scotland and farming safety.  If you’d like to catch up with any of the articles over the Christmas holiday, here they are:

Farming Safety: EG Rural View Dec 14 H&S

Scotland: Rural View Sep 2014

Forestry and Woodland Valuation and TaxationEG Rural View May 2014 Forestry

Water: EG Rural View February 14 Water

Meanwhile a happy Christmas and prosperous new year to all my readers and visitors.

Valuation: Cross-roads or cul-de-sac?

This was the title of my presentation at the RICS Wales Rural Conference held on Tuesday 9 December 2014 in Llandrindod Wells.  Here are the slides.

The contrast between the complexities of valuing woodland for taxation purposes and renewable energy installations is meant to indicate the broad sweep of the challenge facing the modern rural valuer. This is a challenge which is likely to be become broader and more complex with the need to consider the valuation of natural services and capital. Equally the accountability of valuers is only set to grow as the two case updates demonstrate.

Stamp Duty Land Tax and Commercial Forestry

A curious question was posed at last week’s RICS Rural Web class on Forestry Taxation and Valuation.  Can Stamp Duty Land Tax (SDLT) on the purchase of commercial forestry be reduced by removing the value of the trees from the overall purchase price?  Further investigation was required.

It seems that the Birmingham Stamp Office has Continue reading “Stamp Duty Land Tax and Commercial Forestry”

Woodland Complexities

The latest Rural Briefing from RICS addresses the challenging area of woodland taxation and valuation.  A lot can go wrong as the examples we presented at yesterday’s South East Rural Update Conference demonstrated.  One wood worth £70,000 but potentially five different Inheritance Tax bills ranging from nil to £28,000.  Capital Gains Tax was little better with potential bills on disposal ranging from less than £5,000 to more than £11,000.

A link to the briefing paper and an introduction to it can be found here.

These slides summarise the paper.  David Lewis and I presented them at the RICS South East Rural Update on 24 February 2014.

Two further observations emerged during the conference discussion. Ensuring that woodlands can be recognised as a business asset may help to tip the balance in a ‘Balfour’ appraisal of a rural estate, helping to ensure that the majority of estate activity can be recognised for Business Property Relief from Inheritance Tax. This would not only save potentially high IHT bills on woodland assets themselves, but also on other estate assets which might otherwise be unrelievable. Another follow-up question concerned the production of biomass for ‘own use’. This could indeed be a grey area, but one approach may be to ensure that the value of the timber sales is clearly accounted for in estate and woodland records.