Industry Eye: Activity in farm agency sector goes on as sale proved a big attraction

Our most recent sale was Eastfield Farm near Sheffield, sold by auction on 23 September.

The farm extended to 204 acres and sold for 2,273,000. It sold in 11 lots with prices for the land averaging in excess of 9,000 per acre.

Our marketing campaign attracted editorial comment in the national press and a packed auction room produced a number of bidders for each lot.

The prices achieved reflect sales elsewhere with variance in price being dependent upon land quality, interest from neighbours and scarcity. With the current spike in commodity prices and low bank interest rates it seems there is no reason to believe that the rise in land prices this year will abate.

We are frequently reminded that inheritance tax reliefs help drive the market and this is undoubtedly true to an extent.

Agricultural land continues to attract 100 per cent agricultural property relief (APR) for inheritance tax (IHT) but one wonders whether this will always be the case.

It is worth remembering that the Liberal Democrat manifesto proposed the abolition of this relief and they now form part of our coalition Government.

If APR fails a more robust concession may be business property relief (BPR), which can also provide 100 per cent relief for the non-agricultural element in certain instances.

On August 17, 2010 the Upper Tax Tribunal published its findings in the appeal by HMRC against Mr Brander, executor for late Lord Balfour.

The essence of that decision was that where non-trading assets such as residential/commercial property (not normally qualifying for any IHT relief) are held as an integral part of an overall predominantly trading business, 100 per cent BPR may be available for all the assets.

Thus land, houses/cottages and commercial property let to third parties, as well as the taxpayer's trading property used in his estate business activities, could attract 100 per cent relief.

Lord Balfour remained responsible for the running of the estate and managed all the activities for the benefit of the entirety.

The property lettings were ancillary to the predominant trading activity.

Returning to APR we are finding farmhouses that are deemed to be of a character appropriate and therefore eligible for relief will not attract 100 per cent as the non-agricultural element of the value is ineligible.

In the majority of cases the district valuer will argue that some- thing between 10-30 per cent of the farmhouse's value is not eligible for relief.

Similarly land used for agricultural purposes may attract APR, but this will not shelter any hope/non-agricultural value.

This could be disastrous if there is a significant element of development hope value attaching. But it could attract BPR if the right arrangements are in place.

So whilst gaining some comfort from Balfour, farmers and landowners should remain wary.

Every case is different and your plans should be reviewed on a regular basis.

CW 9/10/10