DONT FORGET
DONT FORGET
ABOUT TAX
AND RATES
CHANGE of use of a redundant barn from agricultural to commercial will increase its value sharply. Not only that, but since it is no longer an agricultural building, agricultural property relief (APR) will no longer apply if and when you pass it on to your children.
"You could find that 40% of the value may go in tax," says Tony Kernon. "That may be OK if you have 10 years use, but if you convert it and die shortly after, that would be a tragedy."
Check the tax position at the outset, he advises. It may be that you should transfer ownership to one of your children before you even start down the road of applying for planning permission.
Check, too, what level of business rates youll be paying. You may want to make the occupier(s) responsible for this. Also check whether youll have to pay rates on less obvious items like car-parks.
And another thing. Bear in mind that if you have just one tenant, sooner or later they may want to move on. It may take 6-9 months to find another – how will that affect your cash flow? Think about an arrangement with the existing tenant whereby they get, say, a months free rent if they find a new tenant to replace them when they go.
Finally, remember that the moment you gain planning permission, the building itself will increase in value sharply – even if the conversion hasnt started. That means you should increase the insurance on it, otherwise a fire or other calamity could see the insurer paying you back only a fraction of what its now worth.