Budget 2016: Rural and property points

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”

Trustee Development Spring 2015

The personal responsibility of an estate trustee far exceeds that of a company director, shareholder, limited liability partner or sole trader. This responsibility extends to settlors and beneficiaries, and many others besides. Many people rely on rural estates for their livelihood and homes. Estates are under wider public scrutiny on a scale never experienced before. The complexities of farming and rural estate management have never been greater. New business opportunities abound for the creative estate manager, but the prospect of commercial reward comes with risk.

Working with the CLA we have devised a one day trustee training course which includes a tour of an award-winning estate. The Rhug estate will be our host on 17 March 2015, and we are delighted to be visiting Ragley Hall for the first time on 21 March.

The programme will ensure that estate trustees know their job: a vital safeguard for settlors, beneficiaries, estate managers, other professional advisers and, not least, trustees themselves.

Training Outcomes
On successful completion you should:
• Understand the extent of the personal responsibility of a trustee to beneficiaries;
• Understand the trustees’ role, authority and responsibility in the management of a rural estate;
• Participate effectively in trustees’ meetings and other trust business;
• Relate effectively to beneficiaries, settlors, staff, key advisers and other interested parties in the strategic management and direction of a rural estate

To book a place please follow this link:

https://www.dropbox.com/s/gsuas1gvrojpiib/Trust%20Programme%20Spring%202015.pdf?dl=0

Alternatively, please email Charles Cowap, cdcowap@gmail.com or call Charles on 07947 706505, or use the contact form below. RICS members, chartered accountants and solicitors will be able to claim formal CPD in respect of their participation.

Practical points for Trusts

The inspiring Rhug estate in North Wales was the setting for our first Trustee Training Day yesterday.   It is now almost axiomatic that new company directors must go through some induction training so that they fully understand their role and responsibility, similarly with trustees or directors of charities.  So why not trustees of private trusts?  Their role is just as important, just as demanding and even more exposed to liability.  Yesterday we ran a pilot course for a small group of landed estate trustees and trust advisers.  We combined classroom work with discussion and a short visit to the home farm at Rhug.

It was a great opportunity to share experience of how different trusts actually work, and some of the challenges faced by trustees.  For example the frequency of trustee meetings varied between virtually never and four formal meetings a year, with two being the norm for many trusts.  A growing point of concern however, Continue reading “Practical points for Trusts”

Budget 2014: Rural points

Nothing very obvious grabs the rural headlines in today’s budget other than the extension of CGT rollover relief to the new Basic Farm Payments.  This measure is backdated to 20 December 2013, the date the new payment entitlements were introduced.

The single most significant measure for most rural businesses will be the increase and extension of the Annual Investment Allowance.  Currently £250,000 a year this was due to revert to its former rate of £25,000 after December.  In a very welcome extension it is to be increased to £500,000 almost immediately (from April), and to be extended to 31 December 2015.  Complications which arise from straddling account year ends aside, this is most welcome for any farmer with serious investment plans in the next year or two.  The government reckons this will ‘cost’ £85 million in 2014-15 rising to £1,270 million in 2016/17.  However there will be a benefit to government from 2017-18 of £445 million over two years as annual writing down allowances are proportionately reduced.

The property world will also be interested in the extension of the special taxes which now apply to dwellings owned by ‘non-natural persons’ – generally meaning valuable London property held by companies, latterly to avoid SDLT on sales and transfers.  The threshold for 15% SDLT is reduced to £500,000 from £2 million immediately – although there are savings for those unfortunates who have exchanged contracts but not yet completed.  The threshold for ‘ATED’ – Annual Tax on Enveloped Dwellings – will also start to fall from 2015, to £1 million in the first year incurring an annual ATED charge of £7,000 and the following year to £500,000, leading to an annual ATED charge of £3,500.

Environmentalists will want to study the changes to the Carbon Price Floor.  The Carbon Price Support rate has been reduced to £18/tonne through to 2020.  It had been planned to raise it to £30 per tonne in 2009 prices by then.  However the EU Energy Trading Scheme has not worked well, and continuation at the current floor rate was seen as a threat to the competitiveness of the electricity generating industry.  This should take some pressure off electricity bills in the next few years (although marginally so in most cases).

Other more detailed points which may be relevant in the rural economy and to property include: Continue reading “Budget 2014: Rural points”

The Prince of Wales, Country Life and our countryside heritage

The Conversation is a website sponsored by several universities and others, with the aim of combining academic rigour with journalistic flair. Environment Editor Michael Parker asked me to appraise Prince Charles’ editorial in the Country Life, and this is the article published by The Conversation on Friday 15 November 2013.

Charles: the future

king with retro-

vision

By Charles Cowap, Harper Adams University

In this week’s Country Life HRH Prince of Wales writes of the social and economic importance of farming. It is, he says:

the bedrock of our rural communities, making post offices, pubs, public transport and local health care absolutely vital to the production of our food and the protection of the landscapes we all benefit from in so many ways. This is why the countryside’s contribution to the national good has to be cherished and sustained. Without it, we will all be very much the poorer.

Elsewhere in his editorial HRH writes of the British countryside as the backbone of our national identity. Setting aside for a moment just what the 21st century British identity might be, what about the many generations of seafaring, war, empire, trade, or the industrial revolution? We need only go back to 1701 to see Daniel Defoe’s characterisation of “The True Englishman” in his typically satirical way.

HRH identifies several champions or “heroes” of the countryside, and what an interesting and in some ways inspiring group they are. But heroes? Have they unflinchingly stepped forward to meet terror, risking all for their peers? And can we really say that using helicopters to ferry in material for dry stone walls is a sustainable way to manage the countryside? Here are a few others who we might also recognise for championing the countryside:

  • WG Hoskins, 1908–1922, who taught us to understand the countryside, not least through his The Making of the English Landscape.
  • Octavia Hill, Hardwicke Rawnsley, and Robert Hunter, founders of the National Trust.
  • Kenneth Watkins, founder of the Woodland Trust.
  • Countless agricultural pioneers and innovators including the likes of Bobby Boutflour who did so much to revolutionise dairy farming and cattle nutrition.

Who would be on your list?

HRH rightly recognises the vital role farmers have in feeding us and as custodians of the countryside. But there is a contradiction when he goes on to lament the decline in genetic diversity in livestock, the deteriorating condition of soil and the short herd life of some cows. The Irish potato famines are blamed on lack of genetic diversity with no mention of good rotational practice and other vital aspects of crop husbandry. Can this be a description of the “best farmers in the world” as Prince Charles says?

Contrast this with the views expressed by Allan Wilkinson, Chief Agricultural Adviser to HSBC at the Linking Environment and Farming Conference (LEAF) this month. Wilkinson noted that the performance gap between the best farmers and the rest has always been large – it is now enormous. Wilkinson’s menu for success included attention to detail, good up-to-date knowledge, personal development, looking for ways to collaborate, recognising and respecting the competition.

Price pressure

Prince Charles makes the point that the “big retailers and their shareholders do so much better out of the deal” than the farmers they buy from. He also laments the enormous waste of food in the UK every year. Perhaps some of these retailers understand farming and consumers rather more than we recognise. Increasingly we see the big supermarket groups working with preferred groups of suppliers. During the recent milk price crisis, Tesco was recognised for being more supportive of its producers. In addition Tesco has also just produced its own analysis which revealed the waste of 30,000 tonnes in the first six months of 2013, a vast tonnage lost along the supply chain “from farm to fork”. Losses start in the field, and continue right through to the final consumer.

Waste is not the only problem with food: overconsumption leads to health problems, as are changing patterns of consumption in developing countries. But while many have plenty to eat we have also seen the rapid growth of the Food Bank movement in response to a shameful economic and social need. The Trussell Trust has seen its work triple. It is now rumoured that the publication of Defra research completed in the summer is being suppressed because it links the boom in food bank demand with welfare reforms. Perhaps our list of heroes needs to include Carol and Paddy Henderson for establishing the Trussell Trust in 1997 (named after Carol’s mother whose legacy made it possible).

Like much of what HRH has written about the countryside and farming, there is little to grasp in the way of a broad view of the future of the countryside, much less how to get to that future. The countryside as romantic idyll certainly seems central to his view of the countryside, yet how will that idyll be maintained?

Investing in the countryside, but where?

There are some surprising omissions from Country Life’s editorial. For example, the government is currently consulting on the implementation of the latest changes to the Common Agricultural Policy (CAP). Here is something which really does shape the countryside, and Defra has given us 28 days to respond to its consultation exercise.

Should we move the remaining money “up the hill” to support the beleaguered upland farmers mentioned by Prince Charles? HSBC’s Wilkinson and Tesco would both probably tell us that there is plenty more that the lowland farmers can do for themselves to improve profitability and farming sustainability. There is a strong case for diverting more of the public money to the marginal farming areas – not to support agriculture as such, but to maintain its value in supporting the rest of the industry “down the hill”, and for the numerous environmental and social benefits it can bring us all.

It is a shame that HRH does not seem to tackle this central issue of the extent to which public money should continue to support farming, what value we get in return for it, and the considerable amount of work which is currently underway looking at how we can reflect the much wider value of nature in the management of natural capital and the “purchase” of natural benefits from ecosystem services. All vital considerations in establishing a rural vision which builds on the best of a rural idyll.

Charles Cowap is a member of the Royal Institution of Chartered Surveyors, the Central Association of Agricultural Valuers, and non-executive Director of Management Development Services Ltd. He works as a rural specialist and land consultant for various companies and on various projects developing ecosystem service approaches, and providing training.

The Conversation

This article was originally published at The Conversation.
Read the original article.

Spending Review 2013: Looking for agriculture, environment or rural? Don’t bother

Chancellor Osborne today set out his Spending Round for 2015-16.  Widely mislabelled as a Comprehensive Spending Review, the review only relates to one year – the year in which the next General Election will take place.  It doesn’t offer much hope for the countryside, but there could be some interesting implications for rural property and land in general.

The headlines include:

  • Osborne had to achieve £11.5 Bn overall in cuts
  • The overall emphasis is on growth and public service reforms, with an emphasis on localism, efficiency and fairness
  • A big requirement is to keep mortgage rates low – probably good news for property and housing markets (and a wider-scale disaster if they are allowed to rise)
  • £50 Bn capital spending infrastructure in 2015, covering roads, railways, broadband and flood defences (but see more below).  More on this will follow on Thursday, but likely candidates include improvements to the A14, HS2 and the Mersey Gateway Bridge
  • Schools and tax inspectors will benefit from increased funding
  • Ed Balls for Labour says we should be spending £10 Bn on infrastructure now, while the Institute for Fiscal Studies says we are stuck with austerity until 2018

Important points for the countryside include:

  • Defra subject to further cuts of £37 million by 2013, with its overall budget going down from £2.2 Bn in 2011-12, to 1.9 Bn in 2013-14, £1.7 Bn in 2014-15 and £1.6 Bn in 2015-16 (a year on year cut of 9.6% from 2014 to 2016)
  • Defra has recently been likened to a fourth emergency service for its role in flooding, animal and plant disease (think Foot and Mouth Disease and Ash Dieback), food scandals (how we miss those horseburgers) and Bovine TB.  Flood defence spending is to be maintained in CASH terms, but of course the REAL terms story will be different
  • Defra’s settlement includes £40 million for South West Water in 2015-16 to defray south western water users’ bills
  • Meanwhile Defra has to achieve £54 million in efficiency savings in 2015-16.  This will be achieved by reduced EU fines for non-compliance and greater efficiency in its Arms Length Bodies (Rural Payments Agency, Environment Agency, Natural England) for example by sharing back office functions
  • Meanwhile Defra is to prioritise spending on ‘economically high value areas’ (geographic? Subject?).  This could be one to watch
  • Energy and Climate Change comes with a new emphasis on renewables and a commitment of £430 million for Renewable Heat Incentive, proposed new tariffs and a higher budget cap for RHI payments
  • Food Standards Agency to see a cut in funding from £94 million to £86 million from 2014-15 to 2015-16
  • Funding for science is to be maintained and enhanced, £4.6 Bn in 2015-16

For property and land, big news will come on Thursday with the announcement of Infrastructure Plans.  For the moment we know:

  • £100 Bn infrastructure spending planned for the next Parliament.  This is for transport, science, schools, housing, broadband and flood defences although it looks as if parts of large scale broadband investment may become a voucher scheme for small businesses
  • This should equate to £300 Bn infrastructure spending to the end of this decade
  • £9.5 Bn to be spent on the transport network in 2015-16
  • This will also cover 180 new Free Schools, 20 Studio Schools and 20 University Technical Colleges and Business Centres in all the major trading centres in China

On a smaller scale, Defra and DECC (Department of Energy and Climate Change) have both been targetted with spending £3 million each in the government’s Small Business Research Initiative in 2013-14.  This scheme runs across government and all departments are expected to make better use of it.  It should allow innovative companies to solve specific public sector needs in new innovative ways, so perhaps an opportunity or two here.

Search diligently through the key details document, HM Treasury, Spending Round 2013 for the words environment, climate, rural, agriculture and farming and you won’t find much.  Climate change comes up in terms of fairness – we are committing £969 million to supporting low carbon growth and adaptation in developing countries.  Other than that you’ll only find climate and environment in the appropriate department’s names (Defra and DECC), and you won’t find farming, agriculture or ‘rural’ at all.  Well done on rural proofing this one government!

So what should the land manager, farmer or rural business consultant take away from all this?

  • Of far greater significance for farming as a whole will be the CAP reforms, now possibly in the final inches towards an agreement today
  • With voluntary modulation looking like 15% in England, this could add up to 20% cuts in Single Payments for English farmers
  • And after Cameron’s little regarded EU Budget deal, it looks like 22% less funding for rural development as well
  • Meanwhile Thursday’s Infrastructure Announcement is the one to watch – will there be a new road, fibre-optic cable or railway coming to a field near you?  And will it be an opportunity or a threat to your business?

Power of Attorney: add to your succession and continuation planning list

Power of Attorney is a vital consideration in succession/continuation planning – but rarely mentioned in published guidance on these topics.  Christmas may not be the best time of year to look at succession and continuation planning, but the month or two at the start of the year can offer pause for reflection when days are short, farming or estate activity is at a low ebb and the annual tax return it out of the way.  At its simplest, the grant of a power of attorney allows your appointed ‘attorney’ (or attorneys) to manage your affairs.

Lasting Powers of Attorney (LPAs – not to be confused with local planning authorities or the Law of Property Act 1925) are covered in England and Wales by the Mental Capacity Act 2005, and they are administered by the Office of the Public Guardian.  Comprehensive information and step-by-step guidance can be found on the government website, https://www.gov.uk/power-of-attorney/overviewLasting Powers of Attorney have now replaced ‘Enduring’ Powers of Attorney for practical purposes, although the latter may still be encountered and used – but the rules are different.

There are two types of LPA: (1) Property and financial affairs, and (2) Health and Welfare.  They are not interchangeable so if you want to grant full powers of attorney you need to make both types.  For example your attorney for property and financial affairs may be able to sell your house for you, but not to make decisions on your health treatment if you were unable to do so yourself.  You do not need to be incapacitated for an attorney to act on your behalf, unless the power of attorney you have granted says so.

Why could this be important in a family business?  Say Arthur is a sole trader or senior partner in a family farming business.  He suffers a stroke at the unfortunately age of 45.  Decisions need to be made about his business, and about various choices in his treatment.  The existence of a Lasting Power of Attorney, properly registered with the Court of Protection, will allow Arthur’s attorneys to make these decisions and implement them on his behalf.  Alongside a will, there is every reason to say a Lasting Power of Attorney is a vital tool in the succession and continuation plan for any family business.

So how should Arthur make his two powers of attorney (Property and Financial; Health and Welfare)?

  1. Obtain the official forms and guidance from the government website;
  2. Consider who he wants to act as his attorney, and whether he wants two or more attorneys.  The appointment of at least two attorneys is desirable in case one proves incapable of acting (eg death, bankruptcy, mental incapacity).  Attorneys can be appointed to act jointly – in which case they must decide everything and act together at all times; or jointly and severally – so that each attorney can act independently of the other.  The appointment can also be hybrid – joint action for the big issues (like selling real property); joint and several for smaller items like the payment of routine bills.
  3. Consider the nomination of ‘replacement’ attorneys.  These attorneys are only called into action if the first attorneys are incapable of acting.  This might include the situation where one of a pair of attorneys appointed to act jointly is unable to do so.  In that case, the replacement attorney takes over from all the original attorneys.
  4. Consider who needs to be notified that the LPA is being made.  This list might include close relations, business partners and key associates.  These people are listed on the application form, must be notified of the proposed LPA and can therefore object to its creation (perhaps because they think the nominated attorneys are unsuitable, or because the donor lacked competence to make a LPA for example).
  5. The forms are filled in.  This must be done in the right order: first the donor form (the person granting the LPA); then the certificate; then the attorney(s) themselves.  The Certificate must be given by either certain types of professional (eg GP, solicitor) or somebody who has known the donor for at least two years and feels confident in confirming the donor’s competence to make a LPA.  Only one certificate is needed where there is a list of people to be notified of the LPA, but two are needed where nobody is listed.  Some people are specifically barred from certifying a LPA, eg anybody associated with a care home where the donor is living.
  6. The LPA cannot be used until it has been registered with the Court of Protection. This is meant to take up to six weeks although the current rate is up to 10 weeks for a straightforward application.  The attorneys apply for registration and do not need to do this until they want to use the LPA.  However, it is generally better to apply straightaway in case there are objections or administrative errors in the making of the application – if registration is delayed it may be too late to rectify the problems with a new LPA (eg the donor is no longer competent to make a LPA).  The LPA itself can impose restrictions on its implementation (eg not effective until the GP has confirmed that the donor is no longer competent to act) or this can be left for the attorneys to decide – confirmation of registration does not mean that the attorneys have immediately ‘taken over’ the affairs of the donor.  Delayed or invalid applications may leave no choice but to apply to the courts for an order – likely to be a far less certain, expensive and time consuming process.
  7. Along the way it may of course be very sensible to take legal, property, health and financial advice.  However the government seems to have gone out of its way to make the actual appointment and registration of attorneys under a LPA a very straightforward process.  The current fee to register a LPA is £130, so making both types would cost £260 before any professional advice or certification fees (eg the family doctor may well want a fee to cover his or her efforts in certifying the application).

Effective LPAs could make all the difference between stalled business or family affairs, and the ability of an attorney to step in at short notice and act in the donor’s best interest while he or she is incapable of doing so for themselves (either short term or long term).  For anybody in charge of a business, or with family dependents to consider, this could be a vital safeguard.  And don’t forget the importance of ‘replacement’ attorneys because people don’t always die or become incapacitated in the right order as recent family experience has demonstrated.  I would be interested in readers’ experience with LPAs (or the lack of them), or your response to the considerations in this article.

Well worth a look as we look forward to the new year.

As ever this article offers no more than a summary on LPAs, and there is much more detail to be found in the Office of the Public Guardian’s guidance (see website above) but I hope it will act as a useful prompt to readers.