Relinquishing a Tenancy and Tax

[tullah]

The farming partnership has has been renting two fields since 1982 under the old
Agricultural Tenancy Act. Our landlord now wants to buy us out. Is the money from the sale going to be taxed as income to the partnership or capital gains to the partners?

 

[Ramrod]

After deducting base value and allowances the rest will be subject to CGT, you could probably apply for BADR (entrepreneurs relief) of 10%

 

[Flatland guy]

The farming partnership has has been renting two fields since 1982 under the old
Agricultural Tenancy Act. Our landlord now wants to buy us out. Is the money from the sale going to be taxed as income to the partnership or capital gains to the partners?

Was the partnership the tenant or one partner in the partnership? It is very complex and asking a few different professionals will get conflicting answers. Is the landlord just buying you out of the tenancy and then keeping the land or are they selling the land with vacant possession and you get a percentage?

 

[chaffcutter]

I suspect this would be affected as to how this is defined, eg if it was ‘Compensation for loss of tenancy’ it would be income, but if it was’Purchase of remaining x years of AHA Tenancy ‘ it might be classed as a Capital gain, depending on the figures involved you should be able to work out which suits your particular circumstances best, consult your accountant is my advice.

 

[Salopian_Will]

There are ways around it being taxed. Takes some trust with your landlord but effectively you have to allow them to serve you a notice to quit and for you not to serve a counter notice. Payment becomes compensation rather than consideration.
Get some good advice.

 

[tullah]

So nothing clear cut and several interesting scenarios from various posts to look into. Thank you.

Was the partnership the tenant or one partner in the partnership? It is very complex and asking a few different professionals will get conflicting answers. Is the landlord just buying you out of the tenancy and then keeping the land or are they selling the land with vacant possession and you get a percentage?

The partnership is the tenant and the new landlord wants to buy me out and retain the land for himself.

 

[Still Farming]

What is value of relinquishing a AHA tenancy?
Formula is it??

 

[Salopian_Will]

So nothing clear cut and several interesting scenarios from various posts to look into. Thank you.


The partnership is the tenant and the new landlord wants to buy me out and retain the land for himself.

Partnership cannot be a tenant. It isn’t a legal entity - the partners making up the partnership could be joint tenants.

 

[Ramrod]

There are ways around it being taxed. Takes some trust with your landlord but effectively you have to allow them to serve you a notice to quit and for you not to serve a counter notice. Payment becomes compensation rather than consideration.
Get some good advice.

Normally there is a clause in the agreement regarding compensation, 5/6 times the rent or similar.
Amount of compensation differs greatly from a 'golden handshake '

 

[Formatted]

Formula is it??

Amount of compensation differs greatly from a 'golden handshake '

Whatever you can negotiate. Sitting AHA tenants devalue a property depending on the if there is possibility of succession anywhere between 30-80% of freehold value, so if you want to relinquish your tenancy worth thinking of a number between there. Often here of AHA tenants with dilapidations which means the surrender value can be wiped out; but if you could have succession you may well find a landlord willing to 'pay' you out just to get the property back. TFA will have good advice.

 

[Still Farming]

Lots of ways to look at possibly

 

[Salopian_Will]

Normally there is a clause in the agreement regarding compensation, 5/6 times the rent or similar.
Amount of compensation differs greatly from a 'golden handshake '

Yes but you can still get your 'golden handshake' tax free.

 

[Flatland guy]

So nothing clear cut and several interesting scenarios from various posts to look into. Thank you.


The partnership is the tenant and the new landlord wants to buy me out and retain the land for himself.

Gets more complicated as to who is tenant and getting all partners in partnership to agree possibly depends how many are in partnership or if siblings different outlooks depends upon children.
Also sounds like a new landlord so possibly won't have correct info on whom to serve notices/ communicate with possibly, if not many details transferred to new owner.
Just out of curiousity was it publicly advertised for sale etc or is the new owner someone who inherited or purchased under the counter (without being advertised).

 

[tullah]

Partnership cannot be a tenant. It isn’t a legal entity - the partners making up the partnership could be joint tenants.

My 25 year old son and myself are partners in the farming business and joint tenants on the tenancy agreement. The partnership pays the rent.

 

[tullah]

Gets more complicated as to who is tenant and getting all partners in partnership to agree possibly depends how many are in partnership or if siblings different outlooks depends upon children.
Also sounds like a new landlord so possibly won't have correct info on whom to serve notices/ communicate with possibly, if not many details transferred to new owner.
Just out of curiousity was it publicly advertised for sale etc or is the new owner someone who inherited or purchased under the counter (without being advertised).

It was publicly advertised for sale.

 

[Salopian_Will]

My 25 year old son and myself are partners in the farming business and joint tenants on the tenancy agreement. The partnership pays the rent.

You are the tenants, not the partnership. The partnership can pay the rent absolutely. If a new tenancy was granted to a partnership it would not be to 'Joe Bloggs & Co' it would be to 'Joe Bloggs, Jill Bloggs and Jack Bloggs t/a Joe Bloggs & Co.

 

[Ramrod]

Let's be clear here, unless you have broken any clause in the AHA agreement, or the landlord has PP or change of use (Quarry etc.) landlord cannot serve notice to quit.
Without notice to quit there is no compensation.
From the OP it looks to me as a surrender of tenancy, therefore liable to CGT

 

[B R C]

If it’s a private agreement to give up the land then why does there need to be a notice to quit? I gave up some land last year, agree a figure job done, no legal fees for either party, maybe a degree of trust though.

 

[tullah]

If it’s a private agreement to give up the land then why does there need to be a notice to quit? I gave up some land last year, agree a figure job done, no legal fees for either party, maybe a degree of trust though.

Not sure if I trust him after the condescending way he approached me. Bit of a smart Alec.

 

[goodevans]

Stand your ground in that case,worry about the tax after,that's if you are prepared to give it up.CGT would be better as you could rollover