Who Owns The Farm?
Everyone with an ownership interest in your business must understand who actually owns the property. Misunderstandings can lead to expensive litigation especially when the ‘Three Ds’ arise – Death, Development and Dispute. Lack of planning can also result in unexpectedly high tax liabilities.
A simple example would be a farming partnership of father and son. The farm includes some barns which are about to be sold for residential development with a premium value of £500,000. Unfortunately, father dies unexpectedly and so the Inheritance Tax position has to be considered. If the farm is owned by father then it is likely that 50% of the value of the development land will be taxable at up to 40%. This could cost £100,000.
If the farm is owned by the partnership then it is likely that none of the value of the development will be taxable – saving £100,000.
This is clearly a simplified example but it demonstrates the importance of being clear on who owns the property and engaging your accountant and solicitor in the planning process.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.