With the increase in land prices, grazing agreements have become important for any landowner wishing to ensure that he retains valuable tax reliefs both for capital gains tax and agricultural property relief, including the farmhouse.
To secure these capital gains tax and inheritance tax advantages, the land owner must be able to demonstrate that the grass land is being farmed as opposed to being let. Should the land be classed as let, any income would be taxed as rents and thus regarded as rental income which does not attract any of the above reliefs.
There are measures that a land owner can take to ensure that HMRC would regard his activities as trading. Close attention should be paid to the nature of any grazing agreement and the responsibilities to be undertaken by the landowner as opposed to the Tenant. Failure to get this right could cost the landowner dearly.
Green and Co are ideally placed to help and advise on all farming related matters. Should you require any further information please do give us a call.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.