Care needed to maximise tax relief

Farmers seeking to make use of Entrepreneur’s Relief to mitigate Capital Gains Tax must be careful to structure their business correctly before making a sale.

Failure to do so could mean businesses were not eligible for the reduced 10% tax rate, potentially costing tens of thousands of pounds, said Samantha Kirkham, associate partner at accountant Albert Goodman. Speaking at a meeting in Taunton last week, she outlined some common pitfalls.

For example, where a farm was owned jointly between husband and wife, but the business itself was in the husband’s name, only half the farm would be eligible for relief. “If you’re selling the farm and want to make use of Entrepreneur’s Relief you would need to bring the wife into the business, or transfer the farm into the husband’s ownership.”

Farmers who were retiring and selling land must be careful to time the retirement ahead of the sale, as if they continued trading after exchange of contracts they would void entitlement to the relief, she added.

“And if you’re letting land before you sell it, be very careful how you word the arrangement, as it could be seen that you are not actually farming. In any case, always review your arrangements at least a year before selling, so any changes can be made well in advance.”