Farmhouses worth over GBP 2 million that are occupied by working farmers will qualify for relief from the new Annual Residential Property Tax (ARPT). The government made the announcement on December 11th and those considering agricultural property investment will no doubt be breathing a sigh of relief. Knight Frank has been among those welcoming the measure, stating that HM Revenue and Customs (HMRC) has "seen sense".
ARPT is part of the measures introduced in March to crack down on those looking to avoid paying stamp duty land tax (SDLT) by holding residential property through a company, rather than under their own name. The government has stressed its commitment to eradicating such behaviour and the London real estate market has already felt the hit. The majority of homes worth over GBP 2 million are held in the capital and before the ARPT was announced in March's Budget, a third of all transactions on properties worth over GBP 10 million involved companies. However, this has now fallen to 2.8 per cent.
However, in rural areas, a number of farming businesses are legitimately owners using a company and would have been negatively affected by ARPT. Those properties worth over GBP 2 million and up to GBP 5 million would have been charged an additional GBP 15,000 a year. "Without the relief from ARPT farmers would have been unfairly penalised because there are a number of business benefits to being incorporated," wrote Knight Frank. "A new tax would also have been particularly unwelcome at the current time given that we have just experienced one of the worst harvests on record." However, HMRC has stressed that in order to receive relief, working farmhouses will have to show the property is "character appropriate" to the nature of the farming taking place.
Only time will tell what the impact these measures will be on the agricultural property market, which has experienced somewhat of a boom of late. However, earlier this month Savills predicted an increase in value of 40 per cent over the next five years, prior to the HMRC's announcement.
- Wednesday 19 December 2012