This document summarizes key topics discussed at a Rural Professionals Breakfast event on 13 February 2013. The following were some of the main issues covered: 1. CAP reform uncertainty and the need for transitional arrangements in 2014. 2. Rising concerns about disease control in animals and plants. Bovine TB and Ash dieback were mentioned. 3. Updates on tax changes impacting rural businesses, including restrictions on agricultural ties, business property relief, and the introduction of an annual residential property tax. 4. General discussions on current economic pressures facing the agricultural industry like poor crop yields, rising food and input costs, and land supply shortages.

1. Rural Professionals Breakfast
13 February 2013
Mark Charter, Partner and Head of Rural
mark.charter@bllaw.co.uk

2. "If People have full stomachs they can have the
luxury of multiple problems –
if you are hungry you only have one problem"
Nick Tapp

3. Committed to reduce form filling/bureaucracy
Food self sufficiency
CAP reform – there is a role to play for public money to
compensate farmers for environmental benefits
Bovine TB is the most pressing health problem
I am determined that disease in trees and plants received the
same attention as disease in animals
Owen Paterson, Oxford Farming Conference 2013

4. Outlook
Poor crop establishment
Rising food prices
Increasing concern about disease control
CAP reform uncertainty
Land supply shortage
Rent review uncertainty
Other related rural sectors under pressure eg:
Shooting (game bird cost, PAYE for beaters)
Equestrian – increased feed cost

5. CAP reform:
Current system ends on 31 December 2013
Golden ticket or simple carry forward?
Irish presidency of the European Union until end of June
2013
Multi-annual Financial Framework
Reforms will not be ready to apply until January 2015
Will need to be transitional arrangements for 2014
Pragmatism to prevail?

6. Current
Ash dieback (chalara fraxinea) preventative measures
remain in force
New Environmental Stewardship handbooks for any scheme
commencing on or after 1 January 2013
Revised nitrate vulnerable zone maps come into force on 1
January 2013
£15 million Rural Community Renewable Energy Fund to
launch by March 2013
House of Lords vote on abolition of Agricultural Wages
Board (February/March 2013)

7. Cattle and Dairy
Regulation 261/2012 – Producer Organisations (POs) in the dairy
sector
DEFRA Consultation closed on 21 January 2013
What legal structures will POs adopt?
Minimum of 10 members or 6 million litres of raw milk delivered
annually?
Pilot badger culls in West Somerset and West Gloucestershire
postponed to Summer 2013
Hampshire and Oxfordshire from 1 January 2013 amongst counties
placed on annual TB testing
January – October 2012 - 31,146 cattle slaughtered - bovine TB risen
by 12% in last year (Farmers Weekly 25 January 2013)
Schmallenberg virus

8. Agricultural rights of way
Giles v Tarry [2012] EWCA Civ 837
(1) Mohit Dutta (2) Amanda Queiroz v Thomas Hayes [2012]
EWHC 1727 (ch)

9. Agricultural tenancy issues
Morrison-Low v The Executors of Patterson [2012] CSIH 10
Environmental Stewardship Handbooks 2013/Case B Schedule
3 Agricultural Holdings Act 1986
The Agricultural Holdings (Units of Production) (England) Order
2012
Spencer and another v Secretary of State for Defence [2012]
EWCA Civ 1368

10. Planning
1. Removing Ag Tie Restrictions
Rasbridge, Re Cefn Betingau Farm, Sept 2012
Restriction in planning agreement
Wales
Appn to Lands Chamber (LPA 1925 s84)
Ag tie related to only part of the land for sale
Highlights:
– Onerous nature
– Rigorous need for market testing
– Onus of proof rests on the applicant

11. 1. Removing Ag Tie Restrictions
General rule:
– Market testing is the indicator of need
– Marketed at lower value for a period time
– No offers indicate no need
Little guidance on market testing
– Welsh Practice Guidance…
– Reasonable period = at least 12 mths
– Advertised to relevant potential tenants/buyers
– Price/rent reflects the ag tie (70-75% OMV)

12. 1. Removing Ag Tie Restrictions
What had been done?
– Marketed Jul 2008 to Sept 2009
– Price reduced initially 28% and by the end 39%
– Price estimate based on agent’s 40yrs experience
– Price based on 9 comparable properties from agent’s
database
– Advertised in local press 13 times
– Advertised on websites (agents, Rightmove etc)
Decision
– Application to discharge dismissed
– Market testing not sufficiently rigorous to establish lack of
demand

13. 1. Removing Ag Tie Restrictions
What were the problems and what was required?
– Of the nine comparable properties only one was subject
to an ag tie
– No detailed objective analysis of the comparable
properties, only basic info given
– Analysis of an experienced valuer inevitably needed and
weight should be given to that expertise
– Failure to keep proper records of interest shown (oral,
emails or www)
– Property should also have been marketed with extra land
not subject to ag tie
– Failure to offer property for rent

14. 1. Removing Ag Tie Restrictions
What were the problems and what was required? (cont)
– No advertisements in specialist farming press
– No explicit adjustments made in price to reflect general
market movement which should have been distinguished
from the ag tie discount element
– An ag tie restriction over part was in practice a restriction
over the whole
Lessons equally applicable to ag ties on planning consents
and in England

15. Rural Professionals Breakfast
Tax update
Philip Allen, Associate
philip.allen@bllaw.co.uk

16. CGT and Entrepreneurs’ Relief
Disposal of whole or part of business
Contrast disposal of asset of business
Russell v HMRC [2012]
– Only business was land (21h farmed; 6h sold for
development)
– No post-sale change in continuing business
– Fall in profits after sale insufficient
– But what could Mr Russell have done?
Upturn in property market will raise development opportunities
and ER availability more often

17. Inheritance Tax
Business Property Relief
N V Pawson v HMRC [2012]
– Upper Tax Tribunal has denied BPR on single Furnished
Holiday Letting
– Must be run with view to profit
– Degree of involvement in management
– Extent of services to holiday makers

18. Income Tax - relief
G Pratt & Sons v HMRC
– Farm drive re-surfacing – income or capital expense?
– It was a repair to existing drive, not renewal

19. Income Tax - Farm profit averaging claims
Donaghy v HMRC [2012]
– Can’t average a profit against a loss
– Loss must be treated as nil profit
– Mr Donaghy’s accountant claimed Human Rights Act 1998
applied: averaging doesn’t solve profit/loss volatility!

20. Income Tax – anti-avoidance
S10 Finance Act 2012/s127B Income Tax Act 2007
– Individual or partnership
– Makes loss in property business
– That business has a relevant agricultural connection
– No property loss relief against general income for agricultural
expenses arising in connection with “relevant tax avoidance
arrangements”

21. VAT and Self Storage
More self storage reflects diversification
Exemption ended 1 October 2012
Now standard-rated
Need to identify inputs and apply VAT properly

22. General Anti-Abuse Rule
HMRC and “abusive tax avoidance schemes”
Main purpose is obtaining tax advantage ie anything more than
incidental
Draft Finance Bill 2013
Chance to comment ended 6 February 2013
Double reasonableness test
Too little guidance about impact on the “grey” cases
Will affect Inheritance Tax despite warnings

23. Annual Residential Property Tax
Finance Bill 2013 contains draft rules
Annual charge – starts w.e.f 6 April 2013
High-value UK residential properties ie £2m+ @ 1 April 2012
Owned by certain Non-Natural Persons
ARPT arises if a company or partnership (or collective
investment scheme) meets the “ownership condition” in relation
to a “single-dwelling interest”
Problems may arise for partnerships with a corporate member
£15,000 charge for a relevant £2m-£5m interest
Relief for farmhouses – check criteria
Lots of details to check; more draft legislation published 31
January incl extensions to CGT

24. Disgruntled beneficiaries
Loose talk costs farms - proprietory estoppel
Suggitt v Suggitt [2012]
– Spendthrift son
– Assurance, reliance and detriment
– Vital to review clients’ wills (and other documents)