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”
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.
This year’s edition of Concise Rural Taxation is now available. See the tab for further details of this year’s content, how to order and price (held at the same level as last year).
The fanfare for this Summer’s July Budget trumpeted the arrival of a £1 million IHT exemption for the family home. The detail is not so clear cut. Chancellor George Osborne has introduced a new residence exemption from IHT. It works like this. Continue reading “Inheritance Tax Residence Exemption: Even more smoke and mirrors from the 2015 Summer Budget”
A few headline points for the rural economy from today’s budget, to add to the mainstream reporting:
- 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.
- No more tax returns: sounds good, but will digital tax accounts be any better?
- 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.
- 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.
- 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.
- 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.
- 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.
- 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?
- Subletting within residential tenancies: needs thinking through but apparently tenants may be able to override restrictions in their leases. Form an orderly queue ….
- 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?
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.
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:
Alternatively, please email Charles Cowap, firstname.lastname@example.org 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.