The government is clamping down on property investors, which could have significant implications for diversified farmers and rural estates.
“In the past couple of years we’ve seen an increasing tax assault on people with extra dwellings,” says Jeremy Moody, secretary and adviser to the Central Association of Agricultural Valuers (CAAV). “New investors are face a higher rate of Stamp Duty Land Tax on purchases as well as reduced tax relief on mortgage interest, and there are also further implications for landowners taking a longer-term view.”
Although former Chancellor George Osborne cut the general rate of Capital Gains Tax (CGT) from 28% to 20% from April 2016, the 28% level remains for gains made on residential property – excluding an individual’s principal place of residence, which still qualifies for 100% relief. “From April 2019 the tax must be paid within 30 days of the ownership transfer, which could create some serious cash flow difficulties for anyone handing properties over to the next generation,” says Mr Moody.
“It will also raise considerable challenges when it comes to defining residential property, and calculating the capital gain, which may go back to 1982 base values.” For example, a barn in the process of conversion is likely to be classified as residential. Apportioning the gain in mixed use properties such as a farm will be particularly difficult.
In the case of a farm sale, CGT on the land and buildings will be levied at 20%, whereas the gain on residential properties will be charged at 28%. “A lot of property has been owned for a long time, so the gain will be calculated on 1982 base values, and if it’s been developed from a barn into residential use more recently that will present a further challenge,” says Mr Moody. “Employing an experienced and qualified valuer in these cases will be essential.”