14 July 1995

End discriminatory tax system – CLA

By Philip Clarke

FORMATION of a Rural Business Unit is the mainstay of the Country Landowners Assoc-iations recommendations to chancellor Kenneth Clarke in the run-up to this autumns Budget.

"Currently we have a tax system that discriminates between the different activities within the rural estate," said CLA tax specialist, Brian Castle.

"For example, if a landowner wants to convert a barn but has been renting that building out he will be hit by 40% capital gains tax. But had that building been used in trading he would be able to claim full roll-over relief."

Similarly, any asset used for trading would qualify for full agricultural property relief from inheritance tax, while if it is rented it only gets 50% (so long as it has been owned for seven years).

"The current regime obstructs the sensible redeployment of redundant capital assets and hinders the investment required to ensure new business ventures are successful," said CLA president, Hugh Duberly.

A Rural Business Unit, which the CLA first mooted in 1992, would allow a landowner to put all the different activities on an estate (for example, farming, holiday accommodation, shooting rights and commercial lettings) in one bracket. This would then be treated as trading income.

But Mr Castle warned that this should not be seen as a tax-avoiding mechanism. The Rural Business Unit proposals contain a range of size and management tests to ensure that only genuine rural estates are catered for.

The CLA has also welcomed recent comments by the Prime Minister reaffirming his long-term commitment to do away with inheritance tax and capital gains tax altogether. &#42