Everyone with an ownership interest in your business must understand who actually owns the property. Misunderstandings can lead to expensive litigation especially when the ‘Three Ds’ arise – Death, Development and Dispute. Lack of planning can also result in unexpectedly high tax liabilities.
A simple example would be a farming partnership of father and son. The farm includes some barns which are about to be sold for residential development with a premium value of £500,000. Unfortunately, father dies unexpectedly and so the Inheritance Tax position has to be considered. If the farm is owned by father then it is likely that 50% of the value of the development land will be taxable at up to 40%. This could cost £100,000.
If the farm is owned by the partnership then it is likely that none of the value of the development will be taxable – saving £100,000.
This is clearly a simplified example but it demonstrates the importance of being clear on who owns the property and engaging your accountant and solicitor in the planning process.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.
Green & Co Farms 