Budget could dip land prices
THE ABOLITION of reinvestment relief on Budget day could lead to a fall in land prices.
The relief allowed capital gains tax to be deferred provided proceeds equal to the gain were reinvested in ordinary shares in unquoted trading companies.
It made agriculture a prime target for City money, says Adrian Wilson of chartered surveyor Bidwells. "There is still a lot of money swilling around London. The residential market, where the buyer is looking for a house and a couple of hundred acres will continue. Such farms are the same price as a flat in London."
However, it will remove the top level of buyers, who have been able to place high bids on large holdings.
"Agricultural profitability, and to a lesser extent, tax breaks, drive land prices. A strong £ is going to have a major effect on land prices. But the removal of retirement relief will add to it."
Jim Ward, director of research at FPDSavills, reckons the change will take some of the froth off the demand for residential farms and amenity estates.
However, roll-over relief will continue to drive many land purchases, at least until the full relief from the new capital gains tax taper system is available in 10 years time, he maintains.
"For instance, any capital gain realised during the next 12 months is likely to carry a 37% tax liability which could be rolled into farmland." *