The decline in farming incomes has encouraged many rural businesses to diversify in order to maintain their lifestyle or even to keep their business solvent. Many farmers have found they can make good use of land and property and have turned otherwise idle assets into a reliable source of income. Many land owners have had the opportunity to use land for renewable energy production such as solar parks and wind farms as well as the more traditional revenue producing side-lines like bed and breakfast accommodation or caravan storage.
It is obviously good to have more than one string to your bow, particularly in such a volatile industry, but there can be pitfalls and farmers should take care when engaging in trading activities that are outside the scope of what can be termed “agriculture”. The above activities, for instance, do not constitute trading as a farmer, neither do renting out barn conversions or offering pony-trekking facilities.
Agricultural property can be eligible for Agricultural Property Relief (APR) in the event of the sale or transfer of farm property – providing the majority of the property is being used for agricultural purposes. This is particularly important when one considers the farmhouse itself, which HMRC acknowledges can be an integral part of a farming business. However, the more a farmer uses his property to generate income from other activities, the more likely the taxman can argue against granting APR, on the basis that he is no longer primarily a “Farmer”. Consequently, his entitlement to farming reliefs such as APR may be restricted or withdrawn and this could cause considerable financial problems, particularly when it comes to inheritance tax and care home fee planning. In some cases, it could even threaten the continuity of a farming heritage.
The simple answer is that farmers should always seek advice before entering into any activity which might not be defined as husbandry. Green & Co have come to recognize the complexity of this issue and have a wealth of experience in assessing the dangers of any possible change to a famer’s status if he is generating other income from his property. For more information contact us on 01633 871122.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.