I retired from being a tenant farmer on 31st Dec 2005. I want to trade my entitlement to the incoming tenant. Is this a sale with or without land?

It should be possible to tranfer by either method. The with land transfer would require co-operation of your Landlord and would need to be submitted by 19th March. A without land tranfer will be simpler and you have until 2nd April, you must have claimed at least 80% last year though.

If you transfer it without land there needs to be a side agreement to transfer the entitlement back to you or anyone elected by you at the end of the Tenancy.  A with land transfer will come back to you automatically  at the end of the Tenancy.  The other consideration is the tax implications of doing a with land transfer, there is no VAT chargeable whereas a without land transfer VAT is charged on the whole at 17.5%.  The other element is the Capital Gains Position.

One question is why transfer it to the incoming Tenant are they paying a good price for it?  That Teannt can buy any Entitlement on the open market and you can see it to over 120,000 farmers in the open market which will achieve the best price possible.

My father, who was a tenent farmer, died in January.  We had already applied for the 2005 SPI - although, in common with just about everybody else, this has not yet been validated.  We have just tranferred the land and entitlements to my mother (by the 19 March deadline).  My mother does not wish to continue to run the farm and intends, at some point as yet undecided, to give up the tenancy of the land.  We understand that the 2 April deadline is the time before which entitlements (without land) must be transferred.  However, we want to hand the land back to the landlords - but sell them the entitlements.  Can this be done this year or do we have to wait?  This would entail a further year's rent, which we do not wish to pay, obviously.

Dear Gig

You can certainly still sell your mother's entitlements this year, but as you have rightly said the transfer deadline is 2nd April 2006 so there are only 9 working days of trading to go.  If you sell them after 2nd april they will bbe transferred for the 2007 claim year.  There are advantages of doing this as you will benefit from taper relief meaning the Capital Gains Tax is 10% and the market place will be much more developed.

You should be careful as to how long a noticve you have to give to surrender the Tenancy this is normallly at least 12 months and not more than 24 months from the anniversary Term Date.  If the land is not being given up until dsy September next year you may want to claim the Entitlements for 2006 in order to assist with paying the rent.

Why do you want to sell the Entitlements nback to your Landlord there were allocated to your mother / father as the farmer, the EU does not recognise landlords, as long as your tennancy agreement does not bind you to transfer the entitlements back to the landlord you do not have too.  the benefit of selling them to the open market is that 120,000 farmers are you potential buyer, not one being the Landlord.

If you want to ask another uestion please ring me on (01793) 842055

Yours Sincerely

George T Paton MRICS FAAV

WebbPaton www.webbpaton.co.uk

 

Thanks for your very helpful reply.  There are a few more points I should like to make and a couple of further questions.

Firstly, parts of the farm are owned by different landlords.  Can the entitlements be split?  I have heard varying opinions on this.

Neither of the landlords are practising farmers.  Can they buy the entitlements anyway?  Again, I have heard different stories.  Must they apply to DEFRA for a licence to let entitlements to future tenants.

With regard to the notice to quit - we have been given 1 year's notice by one of the landlords but told informally that there may be room for negotiation.  We do not want to keep the land, since all of the livestock has already been sold - so the only rteason to keep it would be to secure the 2007 payments.  What sort of price should be expected for selling the entitlements back to the landlord in order for him to let them to a future tenant?  We have seen figures of between 1.9 and 2.5 times their face value mentioned.  Should we consider negotiating a deal whereby the landlord waives the 1 year's notice, we transfer the entitlements for a lesser figure and he can then claim the 2007 payments (or sell/let the entitlements to another tenant for a correspondingly higher figure)?  What would DEFRA's view of this be?