News Update from Luscombe Maye’s Rural Professionals May 5th 2020
As we step in to week number seven of ‘lockdown’ here in the UK, we seem to have found an air of normality amidst these strange and challenging times. Daily routines have been established, the weekly social distancing grocery shop feels familiar and agriculture is still in full stride supporting and feeding our nation.
Now that recent headlines suggest we have ‘passed the peak’ of the pandemic, perhaps we can begin to think about life post-Covid-19; how we begin to ease back into ‘everyday life’ and how the virus will affect our return to business.
For the Rural Professionals, BPS applications have not been inhibited. The team have adapted their approach to their usual routine for Basic Payment applications by contacting clients, remotely assessing the requirements for their 2020 applications via telephone and email correspondence along with virtual mapping systems. This has proved to be a successful approach with applications being submitted successfully in their masses in the last few weeks.
It was announced by the RPA last week that the BPS deadline has been extended to 15th June, easing the pressure for some, however, transfer of entitlements must still take place before 15th May.
The RPA has confirmed that bridging payments will be issued to Countryside Stewardship and Environmental Stewardship agreement holders who have not received a 2019 revenue claim payment. The payments should be 75% of the current estimated claim value and issued this May.
Pick for Britain
If you have been furloughed from your place of work, so long as your contract of employment allows it, you are able to undertake other employment such as seasonal agricultural work; namely picking fruit and veg. In the UK, we have seen a shortage in seasonal workers within the agricultural sector, mostly due to the restrictions on international travel preventing the usual workers, from places like eastern Europe, coming to the UK to pick seasonal fruit and veg.
This is a fantastic opportunity for those of us who are not able to work in our current roles to get out into the countryside, get involved with farming and stick a bit of extra pocket money in the bank. If this is something that you’d like to get involved with, there is plenty of information on the ‘Pick for Britain’ website – www.pickforbritain.org.uk.
Returning to ‘Normality’
As we begin to think about re-integrating into what will inevitably be vastly different times for the country post-lockdown, we must consider appropriate ways to conduct business in line with the guidance that will be issued by the government.
Luscombe Maye have anticipated that social distancing will be a key part of everyday business for quite some time which means that client interaction will be limited and conducted safely. The firm will make use of face masks and gloves when on appointments to ensure the safety of their staff and clients alike, while drawing on the success and efficiency of day to day processes used in recent weeks – contactless appointments where necessary, video conferencing between offices and with clients as well as maintaining and driving forward with their ‘green approach’ in respect of vehicle use and paperless correspondence.
Follow us on Facebook
Inheritance Tax: Why Correct Land Registry Records are Vital (Written November 2019)
Landowners will find it easier to protect their inheritance tax relief if they first register all their land with the Land Registry, to establish who owns what within a partnership.
“A large amount of farmland is currently unregistered and a lack of clarity can lead to tax planning problems”, warns Stuart Hext, Senior Partner and Registered Valuer of Chartered Surveyors and Estate Agents, Luscombe Maye.
Difficulties arise because land used by a partnership can be owned by one or more of the partners as individuals or some or all of the partners as a partnership asset.
This can have serious implications when it comes to inheritance tax (IHT) as partnership property achieves 100% Business Property Relief (BPR), whereas property held outside the partnership receives only 50% relief.
When it comes to preparing valuations for tax planning purposes, in particular inheritance tax purposes, if there is a lack of clarity on ownership, which is a necessity for tax planning, the first registration of land can help avoid any uncertainties and help identify who owns what.
Establishing each Land Registry title as a separate asset for tax planning purposes, allows for strong inheritance tax planning. For example, if a piece of land is being used mainly for private horses, then strictly no inheritance tax relief is allowed on the area associated with that title. However, if the land is being used for business purposes, then full IHT relief would be available. The key point is to have strong inheritance tax planning before death and a full understanding of the nature of the private use, together with exact ownership, so that the farm is structured to achieve full or maximum IHT release whilst allowing for full and honest disclosure.
While on one level the process of registering land is reasonably straightforward, landowners would typically find they need professional help. The process involved is submitting a registration application form (with a fee) to the relevant Land Registry, together with evidence of their right to register as the owner (usually a good root of title and an unbroken chain of ownership), together with details of rights, interests and claims affecting the land.
Additional forms will need to be completed and a scale plan of the land with sufficient detail for the Land Registry to identify on an Ordnance Survey map, is also required. If existing deed plans are not satisfactory, then a new plan would need to be prepared.
There are two elements to the cost in registering the land, 1) the Land Registry fee, which is based on the land value, and 2) the professional fees to carry out the work. Surveyor’s fees would depend on the complexity of the first registration and what valuation work may be required, but also a more important element is producing for solicitors acting on behalf of landowners, Land Registry compliant plans with an accurate scale and north point. There are many advantages to having land registered, although some people may prefer to keep the details of their land ownership out of the public domain.
Non-Farming Buyers Set the Pace (Written May 2019)
The value of farmland is being supported by strong interest from lifestyle buyers, investors and high net worth individuals, with farmers accounting for less than half of all purchasers in 2018.
According to the RICS Farmland Index and Survey, the average price for arable land in England rose by 2% in 2018 to £9,400 per acre. This is down by £1,300 per acre from its peak in the second quarter of 2015, but only a little below the five year average.
“The farmland market however has proved more resilient than many might have predicted, considering the Brexit related uncertainties and practical challenges posed by the weather over the last 18 months” says Luscombe Maye’s head of Farms, Land and Smallholdings Department, Stuart Hext.
“The Agricultural Bill, published in September, confirmed the Government’s intention to phase out support payments over a seven year period and much has been made of the negative impact this could have on land prices.”
“However, farm property is only one of a number of factors that determine farmland prices, not least because farmers are not the only people who buy land. The data produced by the RICS, confirms that over the past two years non-farming buyers have played an increasing role in the market”, says Hext.
Land at the right location remains in considerable demand for capital investment for not many non-farming reasons, including development potential, privacy, tax reasons or amenity. For many of these investors, generating profits from farming is not their primary focus.
- Arable land sold from £4,575 per acre to £15,000 per acre in 2018. This is a wide range, affected by location more than land quality.
- Most good arable land is now selling for anywhere between £8,000 per acre – £10,000 per acre, which is down from its peak in 2015, but still a considerable increase from ten years ago.
- Most pastureland sold for anywhere between £6,000 per acre – £8,000 per acre, but an increasing amount sold for below £6,000 per acre.
- More than 100,000 acres of farmland, publicly marketed in 2018 in England – for only the second time in 10 years.
- However, overall the total number of farms publicly marketed remains reasonably stable at around 220 – 230.
Stuart Hext said; “The key to successful farmland sales in the south-west of England is local demand. The market, like everywhere, continues to be polarised by the most competitive bidding, is happening where there is strong local interest from neighbouring or close by farmers looking to secure extra land on their doorstep. This trend is exacerbated by the fact that supply levels remain reasonably tight in the region. Best in class residential farms are selling well, but in line with the slow down at the top end of the housing market buyers have become choosier about properties where there are compromises to be made.”
Agricultural Buildings as Diversification Opportunities (Written November 2018)
The diversification of agricultural buildings to workshop and storage space for the industrial sector is very much an under-reported subject, however it is a relatively low-cost diversification option compared to other, perhaps more common place ideas, for example barn conversions to residential or holiday use. Additionally, commercial lets can also be less high maintenance in terms of management compared to residential or holiday lets. Furthermore, although the initial investment is fairly low, returns from such are often in the region of 10-20%, which is by no means a poor return, particularly if the building is sitting redundant or under-used in the first instance.
Although farms in very rural and isolated locations may not be able to benefit from such diversification opportunities, those that are near urban areas could certainly reap the rewards, particularly if they have good access to main roads. However, with industrial storage being in short supply in the south west in particular, even those sites that are perhaps less easily accessible or strategically positioned near main roads may attract demand from potential users, and so it is certainly an option worth considering when thinking about potential diversification options. Those farmers with big, redundant or under-used agricultural buildings are definitely in a prime position to diversify into commercial storage.
In terms of gaining planning permission to utilise an agricultural building as an industrial unit, the Class R permitted development rights can be employed for the change of use of an existing agricultural building to business uses including storage and distribution. However, if any building works are required to alter the building in any way, a full planning application will have to be submitted to the Local Planning Authority.
Even if the farm does not have an agricultural building that would be suitable for conversion to commercial use, it could be possible to erect a new building on some spare land subject to the necessary permissions, thus it is an option for all farm businesses whether there is a suitable building in situ already or not.
Either way, the resultant building can then be leased out to the user, and the asset kept within the running of family business, or indeed if ever the decision was made to sell the building it would have a much higher market value with the planning permission for commercial use in place than it would as just an agricultural building.
If you have a building that you think may be suitable for conversion to commercial use please contact the Luscombe Maye Rural Professional team on 01364 646 177, who will be more than happy to help.
Brexit (Written October 2018)
For many years now it has been hotly debated on whether Britain’s exit from the European Union will indeed have a positive or negative influence upon British agriculture. In the short term, if Britain doesn’t agree a trade agreement with the EU it could be detrimental for many farmers, in particular those who run beef and lamb enterprises. This is because the trade agreement between Britain and the EU would revert back to World Trade Organization procedures for commerce. This in turn would lead to beef exports facing tariffs of 87% while lamb exports would face a tariff of 51%. According to Tom Maynard of Luscombe Maye “While the tariff for beef is much higher, it is the sheep farmers that will struggle more.” He went on to add that this is because “three quarters of British beef is consumed domestically and therefore only 25% is exported. Moreover, recently China has agreed to import British beef which could be worth £250 million in the first five years alone.”
Tom explained that in his view sheep farmers may struggle because “only 60% of British lamb is eaten domestically with the other 40% is then exported around the world. However, 90% of the British lamb that is exported goes directly to the European Union and if there is a 51% tariff on this lamb, it would simply not be competitive from an economic point of view.” Unless the Government addresses the large quantities of lamb that are currently imported from New Zealand, then there will be a huge surplus of British lamb on the market which in turn would lead to British lamb prices significantly declining.
On the other hand, there is the common proverb that ‘every cloud has a silver lining’ which arguably could be more than appropriate in relation to the farming industry after Brexit. In the short term, the government has promised subsidies until 2022 which allows farmers to plan for the next four years. In the opinion of Tom Maynard “At the current time the Common Agricultural Policy supports inefficient farming practises which harm our soils because the farmer is paid by how much land they own rather than the efficiency of their farming/environmental methods.” Gove built upon this by saying that he believes the UK is only 30 to 40 years away from “the fundamental eradication of soil fertility” in parts of the country.
Examples of the benefits of environmental based farming are already being shown with a farm in Virginia where owner Joel Salatin has been managing livestock and poultry on his land with remarkable results. Over the past fifty years he has managed to increase the soil organic matter from one percent to over eight per cent which has led to drastic improvements on the grass growth at his farm. To conclude, farmers in the short term may struggle to adjust to the new subsidy schemes that Michael Gove will introduce. However, if we want to ensure that British farming in the long term is successful then it might just be a blessing in disguise for British agriculture.
Tom recently joined the Rural professionals team at our Kingsbridge office: 01548 800173.