Reducing tax and helping new entrants

[heritagefarmer]

heritagefarmer

If a farmer has sold land for development and needs to reinvest that money back into farmland before the end of the rollover period, would there be any benefit if an agreement were made for a new entrant to farm the land and eventually buy it back?

Could the landowner then reinvest this money into other businesses, e.g. Houses etc, without being hit hard on tax?

Any thoughts on this or variations on the theme welcome, just thinking out loud!

 

[Formatted]

Are you suggesting a landowner with roll-over money buys a farm and rents it to a new entrant, with the intention that the new entrant goes onto buy the land?

Its a lovely idea but reality is it is difficult these days to buy a farm from farming, generally the best price is going to be paid for land with roll-over money or from a non-farming buyer.

 

[heritagefarmer]

Yes that is what I was suggesting, didn't know if it could be worked in any way to benefit the landowner so that they could reinvest the rollover money into something other than farming, e.g. Houses, without being heavily taxed, as it is my understanding they would be subject to tax if the money were reinvested into another enterprise.

Could you not buy yourself a farm contract rearing pigs/ poultry etc?

 

[Goweresque]

The answer is no, you can't buy a farm with rollover money and then sell it again having lost the capital gains. The whole point of rollover means that from a tax point of view you are in the same position having bought the new business as you were before you sold the old one, ie your base CGT cost remains what it was.

If farmer A sells 10 acres for development for (say ) £1m, having bought it for £30k, his gain if he just banks the proceeds is £970k. If he goes out and buys 100 acres of land instead, rolling over the gain, his base cost for that 100 acres is still £30k. Regardless of who he subsequently sells it to, or how far in the future he sells it, he will still have a big CGT bill to pay. Basically if you want to cash out your CGT gains, you have to pay some tax, 10% if you qualify for Entrepreneur Relief, 20% otherwise (at the moment). All rollover relief does is postpone that day when you have to pay tax.

The only way to extinguish the rollover CGT liability is to die - then your estate gets revalued at death, and the heirs get the asset at market value for CGT purposes.