New Permitted Development Rules - Tax Overview
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Relief (APR) for inheritance tax (IHT) is restricted to Agricultural
Any element of market above AV needs to be protected by Business
Relief (BPR). With the current changes to planning rules for
buildings it can be argued that all agricultural buildings now have
development value and this could come with an increased IHT bill for
who cannot secure BPR.
arise from publication of the government’s long-awaited changes to the
Country Planning (General Permitted Development) Order in 2014, which
the conversion of up to three dwellings with a maximum combined floor
450sq m. These new “PD” rules open lots of property development
for landowning farmers with redundant buildings. However, there are a
qualifying criteria within the new order and one of the most important
buildings that are proposed for conversion to dwellings should have
agricultural use on 20 March 2013. An essential criteria for farmers
take advantage of the relaxed planning permission rules will be
Local Planning Authority (LPA) do not have an opportunity to say that
building is not in agricultural use and therefore deny qualification.
guidance may sound over simplistic, but any buildings which are in, for
example, equestrian use or let out for storage or other
non-agricultural uses on
20 March 2013 will not qualify for the new “PD” rules. In addition, the
do not apply to buildings in areas of outstanding natural beauty (AONB)
in National Parks.
have no intention to develop buildings could possibly be caught for
extra IHT payable
as a result of these changes, ie there could be extra IHT where the
qualifies for APR not BPR. For farmers wanting to take advantage of the
planning rules, there will be a need to ascertain exactly how the
owned. As most farming families trade as a partnership, the task will
be of ascertaining
whether the property is owned inside or outside the partnership. For
non-farming advisers this might sound obvious but there can be huge
in the farming community. Often if Capital Gains Tax (CGT)
Relief (ER) will be needed on disposals there will be need to consider
Associated Disposal rule for properties outside the partnership.
development potential is an area that advisers will not be able to
2014 and the years ahead. The positives are that in reviewing the
for potential development there could be solutions to other farming tax
problems, eg ensuring there is an up-to-date Partnership Agreement, and
farming family Wills have been reviewed.
Residence Relief (PPR)
the farming family will be the increase in the opportunity for
resulting from the PD rules. Such potential development could lead to
of the main farmhouse and achieving a “tax free” gain on disposal using
principal private residence relief (PPR). Other advantages are that the
generation will be able to ‘downsize’ to a property that will suit
in the ‘twilight years’. PPR
prove to be a useful tax planning tool for the farming community in the
ahead as advantage is taken of increased residential development
Where there are
over the large farmhouse and the eligibility thereof for APR, eg
queries over the
size of the farmhouse not being of a character appropriate to the land,
ability of moving to a smaller more functional farmhouse could have IHT
benefits. There is no doubt that PPR could help release funds to the
a tax efficient manner.
The need to join
up the fundamental tax planning with
possible planning permission opportunities
Clearly with all
potential for increased development opportunity the ‘property
portfolio’ of any
farm needs to be reviewed. This is not restricted to what currently
counts as a
dwelling but what could count as a dwelling in the future. There is a
a review of farmhouse eligibility for APR and this should be expanded
total review of properties for ownership/occupation criteria to meet
demands of potential APR and PPR. Such review is of particular
importance post Hanson – Revenue
& Customs Commissioners v Joseph
Nicholas Hanson (Trustee
of William Hanson 1957 Settlement)  UKUT 0224 (TCC)
when the nexus for character
appropriate was decided to common occupation not common ownership.
There is much
need for the farming community to review all planning permission and
planning opportunities around the new PD rules.
About the Author
Supplied by Julie Butler F.C.A.
Butler & Co, Bennett House, The
Dean, Alresford, Hampshire, SO24 9BH.
Tel: 01962 735544. Email;
F.C.A. is the author of Tax Planning for Farm and Land
Professional), Equine Tax Planning
ISBN: 0406966540, and Stanley: Taxation
of Farmers and Landowners (LexisNexis).
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Article Published/Sorted/Amended on Scopulus 2014-08-21 14:36:56 in Tax Articles