Land sales tax trap is eased
Land sales tax trap is eased
FARMERS can rake in large profits by selling land for development. To get the best deal from developers it often seemed sensible for neighbouring producers to join forces and collectively market their land, but until now this has raised serious tax liability issues.
However, new internal guidelines at the Inland Revenue could make the process simpler, says solicitor Burges Salmon. According to the firm it appears the IR is now prepared to accept the outcome of the 1989 Warrington v Brown case.
Under the ruling farmers can put their land into a trust in return for a proportionate share of the total fund. The ruling has established there is now no disposal for capital gains tax purposes upon entering such an arrangement.
Although these trusts will not reduce the ultimate tax liability on an eventual sale they do significantly reduce the tax problems associated with pooling schemes, says the firms John Barnett. But such agreements still need to be carefully framed in order to avoid any confusion at a later date.
Circumstances where this could arise might include the death of a partner or if a developer fails to ever become interested in the land. *