Many farms have diversified and operate additional commercial ventures, such as renting or introducing other business operations.
There are often risks with the potential loss of taxation reliefs if different activities are undertaken and these should be considered in addition to the commercial aspects of the venture.
The main impact of operating new ventures is potentially regarding the Inheritance and Capital Gains tax reliefs. There may be VAT implications if an exempt supply is made, with the need to undertake partial exemption calculations and a restriction on the overall input VAT claims which can be made.
The following examples detail the effects of diversification on the farm:
Letting of Property
This is likely to constitute an investment activity with potential effect on the following taxation reliefs:
- Inheritance Tax reliefs – the availability of Business Property Relief could be effected.
- Capital Gains Tax reliefs – many reliefs only apply to qualifying businesses.
- VAT – the supply may be exempt with the need to undertake partial exemption calculations.
Furnished Holiday Lets
A qualifying furnished holiday let has taxation advances over the letting of normal property. However, for Inheritance Tax they are viewed as investments with the potential for the loss of inheritance tax reliefs, such as Business Property Relief.
Camping and Glamping
There can be uncertainty if a trade is being operated in providing the camping/glamping facilities or if it is income from the letting of land.
Livery and stabling operations can fall as either a trade or rental, impacting on the potential taxation implications.
Any activities which qualify as non-trading, may potentially impact on the availability of taxation reliefs.
Lambert Chapman has an experienced farming team and are able to advise on the taxation impacts of farm diversification.
The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.