Buying Agricultural Land

[nowucme]

Hi everyone,

I've got the opportunity to buy some pasture land (about 10 acres) that adjoins our existing field.

My contracting company is typical flat rate VAT set up.

My quesion is can I buy this land using money in my co. without changing the status of my company or moving to a different VAT set up etc?

Thanks, Robin

[chef]

I am not an accountant but my guess would be, if you answer yes to "Will the land be used wholly and exclusively for business use? and NOT in any way for personal use" AND you can prove this/convince the taxman if they ask questions then you are free to do as you wish.

If however when the taxman asks a question about your company purchase and takes a look on google maps or possibly even takes a nice sunday drive and finds that there is a whacking great extension sitting next to nowucme towers or perhaps a nowucme B&B or even baby nowucme is trotting around on a pony on that paddock then I suspect that you'd have a hard time convincing hector not to tax you, fine you and dig a little deeper into your affairs.

But then again, i'm not an accountant so feel free to ignore my advice.

[northernladuk]

It has always been deemed a bad idea to buy an investment like houses or land through the business. Once you have paid CGT and tax to get it out of the company you have lost most of the profit. It if also becomes more income than your contracting you will also have to change the nature of your business.

Remember also if you want to do anything with it in the future it belongs to the company.. not you.

Keep you personal investments personal and your business ones seperate. IMO

[ASB]

Check it is properly registered with the single payment scheme, otherwise it is devalued. Subsidies now (for about 8 years) go with the land and if it is not registered no subsidies. Registration was a one off process and could never get caught up (though this may have been relaxed).

Don't know the area or intended use, but are you considering, for example, letting the land or selling the grass keep or similar.

There is nothing wrong with the company buying it. Obviously it is not chargeable against tax and the company doesn't get a CGT allowance.

The company can maintain it and potentially let it to you at a commercial rental to avoid BIK issues.

Also check you can use the land for whatever you want to use it for. e.g. if it is agricultural then, depending on how stringent you local planners are, they may sulk if it is put to recreational use (e.g. equestrian).

If you want equestrian use on purely agriculturally designated land it's not normally a big problem, search for how it has been dealt with in your local area. However it will generally involve borrowing some livestock for part of the year.

Some agricultural buildings will still require planning consents (e.g. stabling). However arguably a moveable field shelter doesn't. Just move it every couple of months.

Of course since you mention existing field I doubt the above is of news to you.

[nowucme]

Thanks ASB...yep, familiar with most of your points.

I also know that buying property thro' a contracting Ltd is generally not recommended and I believe means you'd have to change what your company does and come off flat rate VAT.

What I don't know (and waiting for Accountants feedback) is whether this holds true for buying a parcel of land. The land would have future potential for planning for stable yard or even a house, hence could be deemed an investment in my eyes.

R

[ASB]

Thanks ASB...yep, familiar with most of your points.

I also know that buying property thro' a contracting Ltd is generally not recommended and I believe means you'd have to change what your company does and come off flat rate VAT.

What I don't know (and waiting for Accountants feedback) is whether this holds true for buying a parcel of land. The land would have future potential for planning for stable yard or even a house, hence could be deemed an investment in my eyes.

R

In terms of the FRS for VAT you have to designate your business appropriately and choose the appropriate flat rate. You don't have to come off the scheme, but it may be in your interests to do so.

Generally buying investment (and this land would be that) through the LtdCo is not appropriate for most circumstances - though it can be.

If you have the personal funds then buy it privately, if not make then available - perhaps over a number of years.

Certainly purchasing the land through the Co as an ivestment is OK, though HMRC might raise his eyebrows. Consider how much subsidy it will get and the overall rate of return on the investment. Then consider how much you might rent the land for personally or let it. If you can show a sensible rate of return on the invested money it's not likely to be a problem. Also since it's pasture you have the ability to sell the grass keep or let to somebody for stock at the appropriate rate. You could make a case.

In terms of planning for stabling etc not generally a big problem. Quite a lot of ag buildings don't need PP. For residential look at the current local structure plan, and also the next one. If there is any sensible hope of it being included then this will certainly be reflected in the current price.

Of course an alternative is to ensure you buy enough locally, and preferably parcelled together so you can claim a change in strategy and then you'll need that agricultural workers dwelling. (Harder to do than it used to be, but by no means impossible).