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Hi Mike

Just received the latest issue of Farm Ideas.--- another great issue keep up the good work !!

A good caption for the photo on page 37 would be

Three Wise Monkeys--Hear no evil--see no evil--speak no evil !!

Jack Smith

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Farming for tax breaks

More than 50% of farms are now sold to non-farmers, and a good proportion of these are to people who never intend to farm themselves. The FARM IDEAS report (order on-line from this site, price £9.50) on Agricultultural Property Relief provides a detailed explanation, for a cost that's less than a call to your lawyer.

Charles Batchelor in the Financial Times details six ways to avoid inheritance tax.
1. Make a gift more than seven years before you die
2. Hold shares in a small business for at least two years
3. Hold shares in Aim or Ofex listed companies
4. Have shares bought under the Enterprise Investment Scheme
5. Have a working farm and live in the farmhouse
6. Own some commercially managed woodland

This advice results in two difficulties for farming.

1. Because farming tax benefits are far greater than farming profits, investors push up the price of land to values which cannot be sustained by a farming operation. Farm expansion has to be done through tenancies and contract farming.

2. Farmers with big old houses and relatively small farms are increasingly likely to be caught for Inheritance Tax, even when the property is a working farm, and has been farmed for generations. The old house is deemed to be too significant an asset in relation to the agricultural holding, and IHT is claimed on a part of its value. Yet the farmer needs a farmhouse!

The time will come when farmers sell the houses they were born and brought up in because they represent a tax burden on the farm business, and build themselves something more modest. But will they get planning permission? Will they be able to sell off the house as a residence and get the necessary roll-over relief?

We think that farms with large, perhaps historic farmhouses may have problems with today's Chamcellor, and end up in a Catch-22. Unable to sell because of tax, and unable to die for the same reason. All suggestions to mike.