Julie Butler comments on the effect of the new Town and Country Planning Rules on developing agricultural property.
Agriculture Property Relief (APR) for inheritance tax is restricted to Agricultural Value. Any element of market above APR needs to be protected by Business Property Relief (BPR). With the current changes to planning rules for agricultural buildings it can be argued that all agricultural buildings now have potential development value.
The changes arise from publication of the government’s long-awaited changes to the Town and Country Planning (General Permitted Development) Order, which allows the conversion of up to three dwellings with a maximum combined floor area of 450sq m. However, there are a number of qualifying criteria within the new order and one of the most important is that buildings for conversion to dwellings should have been in agricultural use on 20 March 2013. An essential criterion for farmers will be ensuring the Local Planning Authority (LPA) do not have an opportunity to say that the building is not in agricultural use. This may sound simple, but any buildings in equestrian use or let out for storage or other non-agricultural uses will not qualify for these relaxed planning rules. In addition, the rules do not apply to buildings in areas of outstanding natural beauty (AONB) nor in national parks.
Farming families who have no intention to develop buildings could possibly be caught for extra IHT on death as a result of these changes. There will of course be lifetime disposal considerations for the family. As most farming families trade as a partnership, the task of ascertaining how the property is owned will be a key step forward. For non-farming advisers this might sound obvious but often if Entrepreneurs’ Relief will be needed on disposals there must be planning to ensure all the criteria are met.
Planning potential is an area that advisers will not be able to ignore in 2014. The positives are that in reviewing this problem there could be solutions to other farming tax problems, e.g., ensuring there is an up-to-date Partnership Agreement.