How to get a mortgage?

Walterp

Member
Location
Pembrokeshire
There is no main farmhouse, he lives elsewhere with his wife and I believe it is her house not his. As they are married I don't know if it makes a difference who owns it.
Quite awkward.

The procedure is simple enough, as you probably know - simply elect in writing to HMRC to make the new house the farmer's PPR.

It might hard to find a professional adviser to propose this course, because it would involve the farmer (and his wife, unless he is separating from her) moving to live there.

So far, so good.

The problems come afterwards: if the farmer then transfers the house after a very short time (there is in fact no set qualifying period) the HMRC may refuse the relief on the grounds that it was a sham.

The tests are related to the 'quality' of the occupation, and have been developed because tax-payers have been seeking to attach PPR to buy to let properties in an effort to avoid CGT.

If the farmer then moves back into the dwelling he first lived at, he is then scuppered in my view: HMRC might subsequently assess to CGT (who are we kidding, they'd jump at it), leaving the farmer to pay the tax and then challenge it and justify his behaviour. Not an attractive prospect, I suggest.

Short Version: I can't make up my mind if it's a stupid idea, or a risky one, or both. But you can see why no professional adviser would advise it.

There is an alternative view: we all need State social, education and health care; the OP should accept that they did not design their tax affairs as well as could have been, and just pay the CGT.

These services are not only funded by Other People.
 
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Walterp

Member
Location
Pembrokeshire
A separate point, but interesting: just as one of Margaret Thatcher's first actions when becoming PM was to reduce the number of active tax inspectors, one of Jeremy Corbyn's first actions if and when he becomes PM may be to beef up both tax inspection and enforcement.

Which is a pleasant thought on which to start the day.
 

Clive

Staff Member
Arable Farmer
Location
Lichfield
I believe there is no set min time of residence to qualify for PPR as long as the occupation can be proved to be genuine

I once claimed PPR on a house I lived in for less than 12 months and both accountant and HMRC has no issues as my occupation and reasons to sell were genuine
 

Nearly

Member
Location
North of York
I think you'll find that the taxman will be very interested in any disposals of assets at less than market value. The OP should ask an accountant sharpish about the CGT implications of such a sale.

As far as I'm aware any disposal of assets is a taxable event for CGT, even if you give it away for nothing, its as if you sold it for market value. Market value itself can be contested of course, but its still going to be somewhere close.

Edit: yes - market value is used for CGT calculations in cases of sales at less than market value:

https://www.gov.uk/capital-gains-tax/market-value

So the OP's father would pay CGT at 20% (at current rates) on the entire £360k value, less any purchase/building costs and his allowance.

Going off on a tangent.

Why do so many farmers feel it necessary to 'die with their boots on' if the gifting of land etc effectively revalues it upwards?

I've some land which would be set at 1982 values, but was gifted to me and would now be valued at 2005 values. This bit of info means there has been a £4k/acre uplift in base value, which means I'll be cashing it in asap once I've had a word with accountant and advisor. Yes, there will be some CGT to pay but we should be able to stay below the upper band rate.
 

Goweresque

Member
Location
North Wilts
Going off on a tangent.

Why do so many farmers feel it necessary to 'die with their boots on' if the gifting of land etc effectively revalues it upwards?

I've some land which would be set at 1982 values, but was gifted to me and would now be valued at 2005 values. This bit of info means there has been a £4k/acre uplift in base value, which means I'll be cashing it in asap once I've had a word with accountant and advisor. Yes, there will be some CGT to pay but we should be able to stay below the upper band rate.

Gifting of land of land only revalues it upwards if the CGT is paid by the donor at the time. If the gain is held over (as is usually the case) then the recipient's base value for CGT purposes will be the original purchase value (or 1982 value, whichever is most recent).

Hanging on to death does mean that the values are reset for CGT purposes, but of course one doesn't know what the IHT regime will be at the point of death.......
 

Pasty

Member
Location
Devon
Could a discretionary trust be used here? We had to do that with some land my mother owned with me being the sole beneficiary so it is effectively mine. The assets can then be transferred out after 2 years with a hold over election under BPR. That's if the house could be proven to be a 'farm house' I would have thought. Unfortunately it turned out to be a poor choice as my Mother died within 6 months so willing it would have been better. My issue with that was that it vanish in that time or others could challenge the will etc. so I wanted it nailed down, despite the expense / aggro.

In the end it may be better for them just to will it to you. Problem with that is it gives you no security until the will is read out. Also, perhaps father wants some money for retirement?

If it was put in trust with you as the sole beneficiary then it would be secure and you could work out how to get it out of trust at a later date? You wouldn't be able to borrow against it though.

Another option is to treat the house and land separately. If the land was jointly owned by them and gifted, there wouldn't be enough CGT on 3 acres, even on the basis price to go over their CGT allowances, assuming they haven't used them up already. The other benefit of this may be that if the land and house were on 2 different titles, it would lower the value of the house somewhat.

Dunno, just some random thoughts. No idea if any are valid or useful.
 

Nearly

Member
Location
North of York
Could a discretionary trust be used here? We had to do that with some land my mother owned with me being the sole beneficiary so it is effectively mine. The assets can then be transferred out after 2 years with a hold over election under BPR. That's if the house could be proven to be a 'farm house' I would have thought. Unfortunately it turned out to be a poor choice as my Mother died within 6 months so willing it would have been better. My issue with that was that it vanish in that time or others could challenge the will etc. so I wanted it nailed down, despite the expense / aggro.

In the end it may be better for them just to will it to you. Problem with that is it gives you no security until the will is read out. Also, perhaps father wants some money for retirement?

If it was put in trust with you as the sole beneficiary then it would be secure and you could work out how to get it out of trust at a later date? You wouldn't be able to borrow against it though.

Another option is to treat the house and land separately. If the land was jointly owned by them and gifted, there wouldn't be enough CGT on 3 acres, even on the basis price to go over their CGT allowances, assuming they haven't used them up already. The other benefit of this may be that if the land and house were on 2 different titles, it would lower the value of the house somewhat.

Dunno, just some random thoughts. No idea if any are valid or useful.

I managed to stop Dad's accountant putting a house in trust for my brother and sister by finding out that a house that is in (OR HAS BEEN) in a trust can NEVER be classed as someone's primary residence for CGT purposes on sale.

Worth checking out.
 

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quote: “Red Tractor has confirmed it is dropping plans to launch its green farming assurance standard in April“

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