Farm Diversification

Many farms have diversified and operate additional commercial ventures, such as renting or introducing other business operations.

There are often risks with the potential loss of taxation reliefs if different activities are undertaken and these should be considered in addition to the commercial aspects of the venture.

The main impact of operating new ventures is potentially regarding the Inheritance and Capital Gains tax reliefs. There may be VAT implications if an exempt supply is made, with the need to undertake partial exemption calculations and a restriction on the overall input VAT claims which can be made.

The following examples detail the effects of diversification on the farm:

Letting of Property

This is likely to constitute an investment activity with potential effect on the following taxation reliefs:

• Inheritance Tax reliefs – the availability of Business Property Relief could be effected.
• Capital Gains Tax reliefs – many reliefs only apply to qualifying businesses.
• VAT – the supply may be exempt with the need to undertake partial exemption calculations.

Furnished Holiday Lets

A qualifying furnished holiday let has taxation advances over the letting of normal property. However, for Inheritance Tax they are viewed as investments with the potential for the loss of inheritance tax reliefs, such as Business Property Relief.

Camping and Glamping

There can be uncertainty if a trade is being operated in providing the camping/glamping facilities or if it is income from the letting of land.

Livery

Livery and stabling operations can fall as either a trade or rental, impacting on the potential taxation implications.

Any activities which qualify as non-trading, may potentially impact on the availability of taxation reliefs.

Lambert Chapman has an experienced farming team and are able to advise on the taxation impacts of farm diversification.