Latimer Hinks Celebrates Citations in Legal 500 - Latimer Hinks Solicitors

Latimer Hinks Celebrates Citations in Legal 500 - Latimer Hinks Solicitors

Hey, we've done it again! Hard work (and great Clients) has once again paid off. Take a look

WARNING - Diversification Could See Farmers Face Inheritance Tax

There is much in the press informing us of how many farmers are branching out into other activities/businesses.

 

The potential to diversify is massive. We hear about farmers diversifying into tea rooms, riding schools, bed and breakfast, outdoor activities and even a specialist bra supplier (Ample Bosom) in order to keep their main income healthy.

 

However, farmers must be aware of the potentially dangerous inheritance tax implications in diversifying their business.

 

Changes in how land is used can affect the farmer's entitlement to Agricultural Property Relief (“APR”) for Inheritance Tax (“IHT”). APR is a valuable relief for owners of rural property but it can cause problems when farmers diversify i.e. if agricultural land and buildings are adapted for alternative purposes they may not be entitled to APR.There are also important rules regarding not only the occupation but the length of ownership of the property. Farmers and land owners who have decided to change, or are considering changing, the use of their land, should be aware that they can lose APR. If they do so, to mitigate IHT, they must try and ensure that they qualify for the alternative, Business Property Relief (BPR.)

 

For further information see:

New Business Ventures Could See Farmers Face Inheritance Tax warns lawyer

or contact Latimer Hinks on 01325 341500

Anne Elliott is a member of the Agricultural Law Association, as well as a Recommended Professional for the Tenant Farmers Association. In 2011, she was cited in the prestigious Legal 500 directory for both her work on Inheritance Tax and in the category of Agriculture and Estates. This was followed by a recommendation in Chambers 2012 for her expertise concerning, among other areas of law, the Agricultural Holding Act.

 

 

The Thorny Issue of Agricultural Diversification

Anne Elliott, Latimer Hinks Solicitors

It is no surprise that the farming community is becoming more and more attuned to the attractions of diversification. Challenged by the threats of lower dairy prices and higher feed prices (to say nothing of the weather and its threat on yields) taken with the Eurozone problems many continue to look for new commercial opportunities. We have seen a steady increase over the past decade in the number of landowners seeking advice from us in this important area of diversification.

Many farmers and landowners have sought to maximise on the commerciality of their land and have embraced various opportunities. Many have converted under-used or redundant farm buildings, including barns and storage facilities, to provide residential holiday or commercial/business lets, some with considerable success. Other new projects include children's nurseries, small office developments, farm shops, units for storage and warehousing and riding liveries and schools. Other key projects include wind farm developments, commercial fishing lakes and mineral exploitation and landfill.

Potential pitfalls arise when owners of agricultural land choose to go down the diversification route. Some changes can prejudice the farmer's entitlement to Business or Agricultural Property Relief for Inheritance Tax (IHT) purposes. Altering the status of the use from agricultural to, e.g. equine can affect the farmer's entitlement to these very valuable IHT Reliefs.

The principal condition for securing Agricultural Property Relief is that the land must meet the IHT definition of 'agricultural property' and be used for agricultural purposes. Farmers and land owners who decide to change the use of their land for an alternative commercial use run the risk of losing Agricultural Property Relief and thus becoming subject to Inheritance Tax unless they can still qualify for Business Property Relief. It is crucial to seek legal advice before implementing agricultural diversification.

Another important condition relates to the period of ownership and occupation. In general terms, owner occupiers who are trading can secure maximum reliefs after two years - otherwise a seven year period of ownership is necessary.

The rules relating to Agricultural and Business Property Reliefs are complex and professional advice should always be sought.

Agricultural diversification schemes provide a welcome and crucial income stream to supplement that generated by the traditional farm business, but there are possible tax problems, so care is needed.

In summary, the issue of land diversification can be a thorny one. The crucial point to remember is the need to seek sound legal and accountancy advice before implementing any diversification scheme. Agricultural and Business Property Reliefs can be retained, but careful planning is often crucial.

Anne Elliott is a Partner and agricultural law specialist at Latimer Hinks Solicitors. Anne is a member of the Agricultural Law Association as well as a Recommended Professional for the Tenant Farmers Association. In 2011, she was cited in the prestigious Legal 500 Directory for both her work on inheritance tax and in the areas of agriculture and estates. This was followed by a recommendation in Chambers 2012 for her expertise concerning, among other areas of law, the Agricultural Holding Act. Latimer Hinks has a team of around 50 people serving private and corporate clients.

For further information: www.latimerhinks.co.uk or call 01325 341 500. Please note: This article is intended as guidance only. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm

Can't Take It With You - Was it the right advice for a family farming business?

I feel I must put pen to paper (fingers to keyboard) and have a little rant about the recent Can't Take It With You episode which touched upon a family farming business.


As a farmers daughter I understand the complexity of family relations within a farming business. Latimer Hinks has many agricultural clients where succession planning advice is critical in retaining the farming business within the family - and good family relationships.


BUT.. I have to say that I didn’t really agree with the solicitor’s approach re the farming family scenario will and the two options she gave to the parents. In fact I felt both were pretty dangerous in the context of securing the main objective.


Objectives - to keep the business intact/protect the farm and the business which the parents had spent years building and to try and treat the children fairly.

Three sons and one daughter-with the three sons working in the business-all three with wives/partners- youngest child the daughter and obviously the apple of Mum and Dad’s eye-and loved by her brothers

Their solution number one-in the will, give the whole shooting match to one son-how was that protecting the asset?-what if he was divorced/became bankrupt/died prematurely wanting his wife and children to take his estate? Did I miss something?

Their solution number two-the family partnership which was the one the parents went for-with a larger % to son 1 and smaller percentages to sons 2 and 3 and then 10% to daughter-how are those boys going to feel as and when daughter gets older moves on, maybe marries and has nothing whatsoever to do with the farm-especially if farming incomes drop and she is well provided for by her own husband/partner/own means? They may feel ok about it now but I suspect won’t do as years pass and they are older, have worked longer and are locked into the situation particularly if they have their own families who could well be working hard in the business.

I think the solution proposed could be dynamite when Mum and Dad have both died.

I would have felt pretty upset if I had been one of the sons-particularly the 2 younger ones with a smaller share than their brother-although of course he may be doing more work-probably not. I feel a fairer solution which everyone could have been 100% happy with could have been designed.


My Solution
To my mind the classic perfect solution would have been a trust for the land separating the business ownership from the land ownership-certainly protect daughter and ensure she has a share of proceeds if and when the land is sold-I wholeheartedly agree-but surely whilst the farm is effectively a tool of the farming business and generating profits from the endeavours of the boys particularly as they are paying (by the sounds of things) bank borrowings then surely they should share the rewards of their hard work? Keep the deceased parent’s share of the business in the trust and share the trust’s share of profits/losses between the boys if they are doing the work-or let the boys have the business assets but protect the land


To leave the land in a discretionary trust for the use of the boys would protect the asset-so no one child could prejudice its retention for the good of the family as a whole –enable it to be made available to any family members wanting to farm-potentially provide an income for daughter if and as necessary –for example the land could be let to the farming partnership by the trustees and the rent paid to the daughter if she wants/needs income

Summary
Watching all of the episodes broadcast to date I am not sure about these family round table meetings-people get upset/start and talk about fairness and unfairness-and in any family the issues are so often FAIRNESS v EQUALITY-what is right for any particular family may not be right for another and farming families are very problematic where some children are working in and some working outside the farm/the business-the parents have got to be strong and dictate what is fair and that may not be equality-though of course they may not agree between themselves!!

Also what if Mum and Dad change their minds for whatever, but specifically for excellent reasons e.g. a regular review throws up the need for a change in the will -yet don’t feel able to communicate the change of mind to the family-what if eg reverting to the farm and Friday’s programme any of the boys are divorced-not only the sons but potentially divorcing wives have a greater degree of expectation if there has been a round table discussion such as we saw? Personally (preferring not to have a meeting) if there is going to be a meeting I suggest having it once the will has been signed and with only the immediate family present ie sons/daughters.

Some bright spark is bound to come up with an argument about proprietary estoppel where there has been such a meeting if ultimately someone is disappointed and does not receive what he/she perceives he/she was promised eg because a will is later changed!

Wills of business men and women -particularly farmers -benefit from and should be subject to regular review.

I could go on and on and on……….but won’t….but I will continue to promote discretionary trusts in the context of their flexibility - particularly in protecting the farmland and the business assets for the families of the vast majority of farmers who see themselves as custodians of the land for the benefit of future generations of the family who want to farm-with the flexibility for all the family to benefit and to varying degrees/extents if the farm is -as it will inevitably be one day – sold.

Similar considerations apply to all family businesses with some family members working in the business and others not-trusts are the perfect solution to protect the family the business and the principal source of perhaps 3 or 4 families’ livelihoods

Here endeth the rant!

Can't Take it With You

We recently ran a press story prior to the airing of the BBC2 programme "Can't Take it with You". The Press release ran with the title "Growth in Contested Wills Could Mean Heartache for Families".

Friday night’s programme “Can’t Take it with You” was great in showing that there is a solution to even difficult issues but it confirmed my suspicions – that many couples (especially those in 2nd/3rd relationships/marriages) who can’t agree about how they want their estates to pass on death feel that they have a problem that cannot be solved. Therefore they don’t go and see a solicitor and take advice and therefore the issue becomes even more divisive which inevitably affects their personal relationship.

I have had a number of Clients who have died without wills and who I felt didn’t make wills because they didn’t know how to divide their estates between families/step families/charities.

The result was that their estates were administered as intestacies and according to the general law - which led to bitterness, recrimination and to a lot of people left feeling “cheated.”

Friday’s programme showed that a good solicitor can provide a good solution – whether I would, in every case recommend a family “conference” such as was shown on the programme was debateable – after all, circumstances can change after a will is made leading to the need to change a will. Once you have a family “pow-wow” such as we saw there is inevitably an expectation which may not be fulfilled if a will is changed.

A will isn’t usually for life – it may need to be reviewed/changed as circumstances change.

£1000 Donation to the Farm Crisis Network, but do I really need a photograph??

This morning saw me up bright and early leaving home before 7am to keep a breakfast appointment at the Great Yorkshire Show at 8.30am

Incredibly I had to queue to get in to the Showground-a vast area-and then had to find Stand 614!!

I made it and renewed acquaintances with friends and colleagues from the Tenant Farmers Association (of which I am a recommended professional) and was warmly welcomed by all especially the Farm Crisis Network people.

We do a lot of work with farmers in North Yorkshire and South Durham and many of them have a very tough and solitary existence-the FCN supports them practically, emotionally and financially.

On the 22nd May the TFA organised a sponsored walk to raise funds for FCN. Normally I would have taken part BUT the Latimer Hinks Charity Ball was held on the 21st May - which resulted in a very late night/early morning for me! I was in no fit state to attend a lengthy walk but felt we needed to support this very worthy cause.

The ball raised £11,500 with monies going to Help for Heroes, St Teresa's Hospice and smaller local charities. We chose the Farm Crisis Network to be one of our "smaller charities." We wanted to support them by handing over a donation of £1000 from the fund.

Andrea my Marketing PA insisted that this was not just a case of me handing over a cheque-I had to find a beast, a cow, a pig or a sheep to be photographed with –and, as you can see by the photo I duly obliged.

We are making huge efforts to try and encourage farmers and the farming community to look at succession planning-and the TFA and FCN and the Yorkshire Agricultural Society are working with us to get the message out there-very much a case of a joined up approach.

Finance for Farmers - follow up

If you really wanted to attend the Latimer Hinks/Barclays presentation on Finance for Farmers but were unable to make it - here is a brief outline of what was discussed

FINANCIAL SEMINAR FOR FARMERS

Latimer Hinks Solicitors have recently co-hosted with Barclays Bank a breakfast presentation on the theme “Finance for Farmers 2010.”

Issues explored included lending in the current financial climate, the legal issues surrounding providing security for borrowing and the importance of planning for the future and how to achieve it.

Presentations were given by Anne Elliott and Rosanne Green, Agricultural Specialists at Latimer Hinks Solicitors and Martin Redfearn, National Agricultural Specialist with Barclays Bank.

Rosanne Green outlined the legal formalities relevant to providing Banks with security for lending.

One of the important factors highlighted was that the borrowers and the owner occupiers may need to seek separate legal advice.

Rosanne used the example parents owning a farm, but the borrowing being taken by the farming partnership, perhaps including not only the parents but sons/daughters/daughters-in-law etc. Each would need to be advised in their different capacities.

Anne Elliott explained that at the point in time where borrowing is being taken/considered it is very important to look at the structure of the business and the aspirations/intentions of the various parties.

She stressed it was important for farmers to talk to all their advisers - the bank, the accountant, property or personal lawyer and financial adviser in terms of analysing where a business is going and, importantly, succession planning for older generations.

Anne Elliott said: “The event provided a range of practical advice and information which those attending could take on board and which I hope will prove useful in their farming businesses.

It was good to provide the opportunity for people to hear what is involved in relation to setting up and finalising borrowing arrangements and also to talk informally to professional advisers.”

The event was of course followed by a breakfast of bacon and sausage sarnies!