Will Brexit Affect the Value of Your Farmland?

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Fears have been expressed by some land agents that agricultural land prices may fall in the UK, as a direct result of Brexit.

It is expected that the amount of subsidies, such as the Basic Payment Scheme, will decline once Britain leaves the EU, causing some farmers to re-consider their financial position.  Many are already struggling to make ends meet and a reduction in subsidy support, combined with a predicted interest-rate rise for borrowing, may result in many being forced to leave the industry.

As a consequence the demand for farmland could fall away, with the price per hectare dropping by as much as £1,000, despite it having remained fairly robust so far, at an average of around £7,500 for bare land.

However, even the experts admit it is difficult to predict the full impact of Brexit, with so many other factors coming into play, such as trade tariffs, pricing and food imports.  Post-referendum predictions of economic doom and gloom have not yet come to pass, so those in the industry would be wise not to panic at this stage.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Land Prices Fall In First Quarter Of 2016

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Land prices fall in first quarter of 2016 as a result of buyers caution and the depressed agricultural markets.

An average fall of 3% in comparison with the final quarter of 2015

On the brighter side, farmland values remain much improved over those 5 and 10 year ago, showing 32% and 176% increase respectively.

Quality really is key with buyers remaining price sensitive over what is being billed as an unsurprising re-adjustment period within the agricultural land markets.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Farmland – A Capital Performance

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Knight Frank’s farmland investment index shows that over the last 10 years good farmland values have risen by 230%. By comparison the value of prime housing in central London has only increased by 135% and the FTSE100 increased by less than 50%.

There are some indications that farmland prices are not currently increasing at the same rate. However most landowners are long term investors so performance over a 10 year horizon is important.

In any case it helps to have some positive news for landowners in the light of the current recession in agricultural commodity prices and farm trading profitability.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Estate Planning and Farmland

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Most land owners are aware of Agricultural Property Relief (APR) and could be forgiven for thinking that this means there is no risk of their Estate paying Inheritance Tax.

Unfortunately there are situations where farmland does not qualify for 100% APR. There have been cases where the HM Revenue & Customs have successfully challenged claims for APR and the rules are complicated.

Family farms often have the ownership spread across the family and in some cases are owned by the family company. Where land is occupied by one person but farmed by another entity, such as a company, it is easy to end up with only 50% APR. There can also be problems if the farmer leaves a spouse who lives in the house but is not part of the farming business.

It is very important to make sure that property ownership is structured correctly to minimise tax liabilities.

For further information contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Thinking of Selling Your Welsh Land?

www.greenandco.comThe Royal Institute of Chartered Surveyors (RICS) has recently announced that the price of Welsh farmland has increased by around 13% in the last 12 months. Although Welsh land is not as expensive as that of our English neighbours, the cost of an acre of Welsh farmland averaged out at £7,500 for 2014.

A spokesman for RICS states that, whilst there has always been healthy interest in prime rural land, selling prices are being fuelled by interest from lifestyle farmers – those who buy up the land but have no interest in managing or working it – a trend particularly noticeable in the Principality. Renewable energy providers are also on the increase and prepared to offer top prices for land suitable for their needs.

This is not entirely good news though, as there is concern that farming landowners here in Wales will be tempted to cash in, particularly with the uncertainties which lie ahead in 2015 such as milk pricing, membership of the EU and changes in the subsidy system. Some may feel pressured into making hasty decisions with regard to selling off their land at a premium price, and this might have an adverse effect not only on the profitability of their business, but also the financial future for themselves and their families.

As well as considering the effects on the future of the enterprise, the burden of taxation must also be carefully considered before making any decision to sell farmland. There are many questions to be asked about the area to be sold, because the way disposal of land affects a business is reflected in how any gains or profits are treated for tax purposes. For example, a sale which does not diminish the viability or change the nature of a farming business will be unlikely to attract any Entrepreneur’s Relief. The disposal of redundant land could be viewed as the sale of an asset rather than the sale of part of the business and would therefore be subject to Capital Gains Tax at the full rate. There might even be a need to reconsider Inheritance Tax planning, particularly if the area to be sold is significant. However, if the proceeds are to be re-invested in another business asset, there may be an entitlement to Rollover Relief, dependent on timing issues. In some cases where the farmhouse is sold and the farmer has to re-locate, Principal Private Residence Relief might apply.

It sounds obvious, but farmers considering selling land should always seek professional advice beforehand. As always, each case needs to be considered on an individual basis, as what applies in one instance, may not be relevant in another.

If you are a farmer and considering selling some of your land please contact us for the best advice to help you make the best decision for you and your business.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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