Time to consider best use of various tax-efficient farming arrangements

09 Aug 2022

By Roy Jackson, Rural Partner

Over recent times, there have not been significant changes to Inheritance Tax (IHT) and Capital Gains Tax (CGT) reliefs for our farming clients.

The tax landscape and HMRC approach to tax collection is however on the move, so it is a time to consider the best use of various tax efficient farming arrangements.

In addition, with so much potential change on the horizon in the farming industry, with land based subsidies being withdrawn in England, there is a need to review alternative farming solutions to cope with such changes and for farming business, without succession in place, that may need help with the changes on the horizon to maximise income from assets and retain tax reliefs, joint ventures may provide an opportunity to address and derive most value from farm property but, they must be structured correctly to enable the tax reliefs to be maintained.

In 2021, Baroness Kate Rock, a member of the Rural Economy Committee in the House of Lords Select was quoted as saying: “landowners should not be allowed to use share farming, contract farming, share partnerships and/or grazing licences as thin facades of trading activity so as to gain a tax advantage where they take no risk, have no entrepreneurial input and lack any management control.”

The need to review Contract Farming Agreements and other alternatives joint venture arrangements at this changing and challenging time is important.

If you do have a joint venture in place, or you are looking to enter into such an agreement, it is therefore important to review agreements at this time, or before these are signed, with your tax advisor, legal advisor and land agents to ensure they provide flexibility for the future, but are also structured to retain and enhance tax reliefs for you.

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