Acting for Farmers & Landowners - Tax Risks & Negligence Traps

Introduction

This full day in-person course is designed to give delegates a full overview of the tax risks and negligence traps currently facing the farming sector, with a particular focus on the role of the professional advisor in an ever-changing industry and looking at these problems in the context of a farm tax update.

The high achievement of farmland values has increased the quantum of risk and the complexity around acting for farmers and the lack of clarity in some areas can cause problem and debate with HMRC. In this highly practical seminar delegates will be provided with a summary of the common negligence traps that exist in acting for farmers and landowners incorporating development land. With increased values there are attacks from every corner, e.g. ‘stealing siblings’, threats of ‘undue influence’, and consideration of testamentary capacity.

The course will also look at the risks of the Agriculture Bill and the proposal of “public products” - access to farms and the countryside. The impact is the worry that the ecological emphasis of new subsidies do not currently qualify for APR or BPR as they run the risk of not being agriculture and not being business.

In addition, it is understood that only one third of farming partnerships have Partnership Agreements in place, and the majority are out of date. There are large tax problems of owning the farm in the Ltd Company and the result is that the majority of the UK farming industry trades through partnerships, and thus it is vitally important for the professional advisor to understand the significance of having, or not having, these agreements in terms of both risk and tax.

This course will also therefore look at all tax planning angles of farm partnerships, and how to ensure robust farm succession planning around the interactions around the different legal structures and tax risks. It will also explore the dangers of acting without a written partnership agreement and what should happen in the future if there is a dispute or a partner leaves or dies. A robust agreement will define the position on partnership assets and the need for an agreement to be supplemented by an appropriate Will and LPA for each partner. It is essential that there is robust legal protection.

What You Will Learn

This course will cover the following:

Avoiding the risks and negligence traps

• Mehjoo v Harben Barker - the need for specialist advice
• Putting protection in place for the famer and the professional: the importance of the confirmed instructions
• The risks of claims on farm estates under Inheritance Act 1975
• The need for the fact find - the comparison of the non-dom significance and the importance of the permanent file for understanding the farm operation
• The dangers of 'squabbling siblings' on succession. The significance of 'implied terms' for the nature of the professional advice without written agreement
• The elderly farmers not prepared to pay for advice - putting safeguards in place
• Capital allowances and repairs ensuring they tie into succession planning (Pratt, Hopegear and Cairnsmill) - the risk of unfair allocation of the farm with other siblings
• A mix of advisors and the need for a clear definition of roles: Memorandum of understanding - clarity of who is responsible for the separate elements of advice
• The importance of legal agreements in place: the Will and risk of intestacy, disputes and loss of tax reliefs
• The grazing agreement, the deed of variation, contract farming and the partnership agreement
• Farmland values: Chadwick, the quantum of risk on increased values of development land - warnings, Palliser and hope value
• Farm losses - French, Silvester, Scambler, Erridge
• The IHT400 - the importance of the history of the farm and Accounts information for evidence
• The new CGT filing from April 2020
• The profitability of woodland and subsidy advantages of replanting
• The problems of the horse and loss of agricultural status and tax diversification
• Diversification - protecting the risks. Furnished holiday accommodation cases of Nott, Pawson, Green, Ross and success of Graham (HMRC not going to UT)
• Weak contract farming agreements - consider farming in hand - Arnander
• Weak grazing agreements - take back in hand (McCall and French)
• HMRC attacks ono grazing agreements
• VAT on liveries, partial exemption, artificial separation, links to Vigne (UT success)
• The IHT and CGT weaknesses of the FBT - need to identify incorrect FBTs and other leases
• Vigne and enhanced liveries (emphasis on services provided), success of Upper Tribunal
• The 'stand alone' company
• The farmhouse risk - occupation - the diary of hours spent
• Farmers retiring - 'retired farmer' and the death certificate - is the tax planning in place
• The problems of CGT v IHT and the risk of protecting one and risking the other (associated disposals withdrawal v partnership property - 100%BPR)
• Proactive farm tax planning: the risk of usage of 'pushing the client'
• The aggressive stance by HMRC. The risk extra tax equals a PI claim
• Impact of Brexit, the Agriculture Bill and BPS planning
• 20% rate of CGT v entrepreneurs relief (ER)
• Allen and Moore cases for ER
• Johnson and the non-monetary value
• Development - slice of the action and overage
• Caravan storage and the need for services - the hamper and lavish services to move activity from holding investment to trade
• Development land, the NPPF2 and other planning opportunities
• Protecting cottages and let activity with Balfour
• The risk of post transactional tax planning
• The grain silo case, importance of farm capital allowance
• Glais Care Homes - the capital allowances on farm purchase
• Smith v Stanley - ability to repair error through the courts
• AIA at £1 million for 2 years - planning to 2020
• Farm succession planning post the Tory landslide- the need to make the eligibility of the IHT reliefs robust and reduce investments
• The Foster valuation case increases the quantum or risk
• Grazing licences post Gill the emphasis of working

Partnership Agreements

• The importance of farming partnership agreements with increased farm values and farming family disputes
• Partnership agreements - the problems of weak drafting 'per Accounts' - Ham v Ham - fair value
• Protection of capital and income rights
• Link to Wills and other legal agreements
• Assets used in the partnership - 100% BPR as opposed to 50% BPR
• 'In or Out' of the balance sheet for partnership property
• CGT v IHT for overall planning
• Associated Disposals and development land - the withdrawal advantage on non-partnership property
• Entrepreneurs relief - Withdrawals v cessation
• Retirement provisions and protection
• Death - What happens to partnership interest and assets? Protection re s 33 PA 1890
• Land Capital Account - the risk of not understanding
• Corporate partners - where now post loss of AIA for mixed partnerships
• The drawbacks of incorporation and ownership - ATED, Minority shareholdings and APR
• Disputes - Ham v Ham, Davies v Davies ('Cowshed Cinderella'), James v James - need for quality legal documents
• Definition and protection of the beneficial interest
• Market value v historic cost for incorrect drafting
• Ham v Bell - the impact of the Accounts as evidence, the importance of the Will
• CGT base cost protection
• Protection through identifying conflicts of interest
• Capacity of the Will, the LPA protection and tax planning
• Maurice and Shirley Bell - the risk of loss of rollover relief, is it partnership property
• Protection through first registration as tax planning tool