1. 64 JUNE 2016DAIRYFARMER
FINANCE
Whether they are staying in milk production or not, some producers may be considering the
sale of some off-lying or ‘non-core’ assets such as land or old buildings, and if so they need to
plan ahead. Sam Kirkham, of Albert Goodman, explains.
atic. Planning for the sale to
ensure crucial steps are put
in place at around exchange
of contracts is vital.
Even if the whole farm is
being sold, the timing of the
sale of the property in rela-
tion to the cessation of the
business is critical to ensure
the sale qualifies for ER.
There are other simple re-
liefs that are often over-
looked. Where assets have
been sold at a loss in previ-
ous years or where pur-
chased milk quota was held
prior to its abolition last year,
these losses can be used to
offset future capital gains.
Where part of the farm is
sold and part retained, there
are special rules for calculat-
ing capital gain on the part
disposed. This provides an
opportunity to use one of
two alternative methods to
calculate the gain which may
reduce overall tax payable.
In addition, where the
gain qualifies as a small part
disposal, the sum received is
deducted from the allowable
cost of the retained part
going forward, effectively
deferring the tax payable
until the retained asset (re-
mainder of farm) is sold.
For those selling residen-
tial property, which has been
their main residence during
their period of ownership,
relief will apply which can
relieve all or part of the gain.
In addition if all or part of
the property has been let
during the period then
lettings relief can apply.
For tenant farmers re-
quired to live in the tenanted
farmhouse under the terms
of the tenancy, and for those
employed and in job-related
accommodation, if they own
a residential property and
intend to live in the property
in due course, then main res-
idence relief can exempt the
gain on a future sale, even if
they have never actually
lived in the property. This re-
lief is often overlooked and
advice will be beneficial to
ensure the relief applies and
is claimed correctly.
Finally, where land or
buildings which have been
used in the business are sold,
and there is an intention to
reinvest the proceeds into
new assets used in the busi-
ness, the gain on the sale of
the old asset can be deferred
until the sale of the new asset.
The new asset will need to be
purchased within either a
year before the sale of the old
asset or three years after-
wards. One often overlooked
point with rollover relief is it
is the sale proceeds which
have to be reinvested, not the
amount of the capital gain.
C
apital Gains
Tax (CGT) is
the tax on the
increase in
value of an
asset between the time it is
acquired and the time it is
disposed. With land price in-
creases over the last 10 years
the capital gain on land sales
is often substantial.
Prior to the Budget, most
capital gains were subject to
tax at either 18% or 28%. The
18% rate only applied to
small gains, with larger gains
taxed at 28%. However from
April 6, with the exception of
gains on residential proper-
ties, the rates reduced from
18% and 28% to 10% and
20% respectively.
Where qualifying gains are
chargeable to tax at 20%, it
is beneficial to make sure
entrepreneurs’ relief (ER)
applies to reduce tax rate
to 10%. Where only part
of the farm is being
sold, qualify-
ing for ER
is more
prob-
lem-
rThe difference between good planning and no planning
can be very substantial in relation to the sale of assets and
the consequent capital gains tax charge.
Expert opinion
“Where
purchased milk
quota was held
prior to its
abolition, these
losses can be
used to offset
future capital
gains
Seeking out relief from Capital Gains
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