Succession advice

893bet

My dad (75 next year) has a small sucker farm. Around 40 head cattle at maximum point of year (15 cows+15 calves +10-15 weanlings/stores.

We are looking ahead to when he dies and passes it on to me what is the most tax effective way. Given the inheritance threshold is so low these day (225,000, a sneaky act by the government that passed with out a whisper) how can I take ownership with out tax liability.

Specifically....
1) How do I qualify for the reduction of the value of agricultural land by 90%?
2) Does planted land qualify for the reduction?
3) what do I need to have done to ensure when i take over I continue to be eligible for the SFP and extensification schemes
4) There was a lot of talk about the "green cert" being needed 10 years ago if inheriting a farm etc. Is this still the case?

Any help of advice/experience appreciated.

trg

893bet wrote: »

My dad (75 next year) has a small sucker farm. Around 40 head cattle at maximum point of year (15 cows+15 calves +10-15 weanlings/stores.

We are looking ahead to when he dies and passes it on to me what is the most tax effective way. Given the inheritance threshold is so low these day (225,000, a sneaky act by the government that passed with out a whisper) how can I take ownership with out tax liability.

Specifically....
1) How do I qualify for the reduction of the value of agricultural land by 90%?
2) Does planted land qualify for the reduction?
3) what do I need to have done to ensure when i take over I continue to be eligible for the SFP and extensification schemes
4) There was a lot of talk about the "green cert" being needed 10 years ago if inheriting a farm etc. Is this still the case?

Any help of advice/experience appreciated.

The 225k threshold is in for a couple years now.

1 - your agricultural assets must be = or > 80% of total assets. The only mortgage/borrowing that you can offset is the mortgage on your principle dwelling house. Be aware that you must retain ownership of the land for 6 years or there will be a clawback of the relief. This may be avoided if you replace with different land within a certain period of time. Unsure of specifics.

2 - No. Not seen as agricultural land.

3 - Pass. Agri adviser required imo.

4 - you need green cert to qualify for stamp duty exemption provided you intend to spend half your normal working time farming the land. Stamp duty will be payable on the planted land and it should be transferred in a separate instrument to the other land.

You may be able to plan particularly point 1 but you'd need to visit accountant/solicitor for this.

Nekarsulm

Very much open to correction, but I believe that it is much more tax effective to be gifted the land during the owners life time, rather than after his death.

trg

Receiving land after death means no CGT or stamp duty. Agricultural relief will still be available to the successor but obviously it would be harder to plan.

Muckit

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have2flushtwice

Nekarsulm wrote: »

Very much open to correction, but I believe that it is much more tax effective to be gifted the land during the owners life time, rather than after his death.

How do u approach that situation?! Lets say an uncle has no children, and 1 nephew. Should the nephew assume the best and go to the uncle?

On the other hand, if you have any evidence that there was a sucession plan in place, such as staying over, receipts for working, post going to the address with your name on it, it will help your case. I was told that by a pension advisor, but get your own advice. The best few quid ul ever spend.

ganmo

I think The favourite nephew rule applys to non family members too.

kowtow

trg wrote: »

The 225k threshold is in for a couple years now.

1 - your agricultural assets must be = or > 80% of total assets. The only mortgage/borrowing that you can offset is the mortgage on your principle dwelling house. Be aware that you must retain ownership of the land for 6 years or there will be a clawback of the relief. This may be avoided if you replace with different land within a certain period of time. Unsure of specifics.

2 - No. Not seen as agricultural land.

3 - Pass. Agri adviser required imo.

4 - you need green cert to qualify for stamp duty exemption provided you intend to spend half your normal working time farming the land. Stamp duty will be payable on the planted land and it should be transferred in a separate instrument to the other land.

You may be able to plan particularly point 1 but you'd need to visit accountant/solicitor for this.

The test in point (1) is being replaced on 1st January 2015, following last weeks budget.

The relief remains the same but the recipient must either (a) be an active farmer or (b) lease the land to an active farmer for six years upon receiving it.

The definition of an active farmer for these purposes, as far as we know is either (1) to have an agricultural qualification or (2) to spend 50% of your working time on the farm - in this case for the six years in question.

The budget speech was silent upon whether the 80% asset test remains in addition to the above, and also on whether and what livestock and machinery are included in the value. As far as I know the previous test excluded machinery, unlike the UK, although it may have included livestock and entitlements. You should seek precise professional advice particularly if a transfer before 1st January 2015 might be a useful option.

Reggie.

kowtow wrote: »

The definition of an active farmer for these purposes, as far as we know is either (1) to have an agricultural qualification or (2) to spend 50% of your working time on the farm

What is a qualification do you think?. A green cert or a herd number?

Username John

Reggie. wrote: »

What is a qualification do you think?. A green cert or a herd number?

Wouldn't see how a herd number would be a qualification?
But, I could be wrong...

Reggie.

Username John wrote: »

Wouldn't see how a herd number would be a qualification?
But, I could be wrong...

I would agree. Herd number surely means your an active farmer wouldn't it?
Just trying to clear that up in my head.

kowtow

Reggie. wrote: »

I would agree. Herd number surely means your an active farmer wouldn't it?
Just trying to clear that up in my head.

The Government definition of "active farmer" reminds me of Humpty Dumpty - "When I use I word it means precisely what I want it to mean, neither more nor less"

In this case, apparently, it is either possession of an agricultural qualification - which one is unspecified - or spending 50% of your working hours on the farm. A herd number is nothing to do with it.

You do have time to qualify or work after inheriting.

Presumably those with agricultural qualifications are so efficient they need only spend a few minutes a day on the farm, and would not therefore meet the 50% test.

Ten Pin

I think one of the definitions of an active farmer is being in receipt of a payment under a Dept of Ag scheme (AEOS, REPS, SFP etc). I had asked a similar question in another thread a few days ago so this thread is timely for me.

Is it the case that someone can become an active farmer by agreeing to takeover all requirements of a scheme?

kowtow

Ten Pin wrote: »

I think one of the definitions of an active farmer is being in receipt of a payment under a Dept of Ag scheme (AEOS, REPS, SFP etc). I had asked a similar question in another thread a few days ago so this thread is timely for me.

Is it the case that someone can become an active farmer by agreeing to takeover all requirements of a scheme?

As far as CAT is concerned, the definition and the reasoning behind it is the one in my post above, and it is set out in the INDECO report to the agri-taxation review which has been largely adopted in the current budget. Presumably we won't know the final wording until the relevant implementing legislation is passed, but it is definitely due to be in force on 1st January 2015.

Until then the 80% test applies.

Young Blood

I'm no expert but if you become co owners of anything, for example property or a bank account, the survivor inherits everything after the other co owner dies.

You can avoid pretty much all pitfalls a will usually brings with it.