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Title: UK200Agricultural%20Group%20Specialist%20Training%20Course


1
UK200Agricultural Group Specialist Training
Course
  • Wednesday 23 June 2010

2
FARM SUPPORT AFTER 2012
RICHARD KING
  • June 2010

3
THE IMPORTANCE OF SUPPORT
4
SOURCES OF FARM INCOME

5
LOAM FARM MODEL
  • 600 Ha of combinable crops (W. Wheat, W. OSR, S
    Beans)
  • 240 owned, 360 FBTs owner, 1 FT worker,
    harvest casual

Single Payment and ELS 283 Business
Surplus 116
6
FRIESIAN FARM MODEL
  • 150 cows averaging 7,500 litres on 100 Ha (part
    rented).
  • Year-round calving, liquid contract. Owner
    worker.

7
MEADOW FARM MODEL
  • 154 Ha mixed lowland farm (114 Ha owned, 40 Ha on
    FBT)
  • Beef (suckler cows, and finishers) sheep and
    arable
  • Proprietor, 1 FT family worker casual

8
BACKGROUND TO THE NEXT REFORM
9
THE PROCESS AND TIMETABLE
  • Future of support under the CAP will be
    determined by next EU budget for period 2014-2020
  • Single Payment 2012 is paid for out of 2013 budget
  • - Current Intense lobbying (public debate to
    June)
  • - Autumn 2010 Budget Review published (no
    figures)
  • - November 2010 EU Commission White Paper on CAP
    reform
  • - Mid 2011 Formal proposals on 2014-2020 Budget
  • - July 2011 Legislative proposals on CAP reform
  • - Mid/Late 2012 EU Farm Ministers EU
    Parliament agree farm support reform ?
  • - Late 2012/Mid 2013 EU Heads of State agree
    budget ?

10
NEGOTIATING ISSUES
  • What is agreed for CAP (by Farm Ministers) may be
    over-ridden by (later) budget deal (Heads of
    State)
  • Potential policy vacuum for 2013 SPS year -
    roll-over of present system for one year?
  • Attitude of new Farm Commissioner (Dacian Ciolos)
  • Under Lisbon Treaty European Parliament now has a
    say in agricultural policy slower reform?
  • Discussion tends to focus on future of direct
    payments (SPS)
  • as largest proportion of aid
  • UK government wants phase-out of direct support
    (unlikely)
  • other areas such as market support and Rural
    Development also important

11
CURRENT EU SPENDING
2007 to 2013 Budget Period
  • Average spend 139bn (118bn) per year - CAP
    59bn
  • Total Budget 1.1 of EU Gross National Income
    (GNI)

12
WHAT ARE DIRECT PAYMENTS FOR?
A fundamental question without a simple answer.
13
CURRENT SPS

14
WHAT MIGHT HAPPEN
15
SIMILAR / LESS MONEY FOR CAP
  • A continuation of current budget (at current
    prices) best that might be expected
  • Any cuts phased through to 2020
  • CAP to fund more Member States (Balkans, Iceland
    etc.)
  • Co-financing (of Pillar 1) a possibility -
  • Member States part-fund the SPS
  • Compulsory or Voluntary renationalisation of
    the CAP


16
RE-DISTRIBUTION OF PILLAR 1
  • Direct Payments / SPS / Pillar 1 to continue
    through to 2020
  • Recognisably the Single Payment Scheme
  • Entitlements to support, activated by occupying
    eligible land, and cross-complying
  • More equal distribution (in per Ha terms) across
    EU Member States
  • Switch to New Member States (little effect on
    UK?)
  • Allocation not just on agricultural area a
    formula bringing in costs, agricultural
    employment, land type etc. may be used
  • MS allowed to pay differential regional rates
  • Historic payment basis ended


17
SWITCH OF FUNDS TO RURAL DEV.
  • Share of CAP funds going to Rural Development to
    rise
  • Implies 2 Pillar model CAP remains
  • Partially occurred already in the UK through high
    voluntary modulation
  • Fairer allocation of RD funds among MS - similar
    to SPS benefit to UK
  • Any shift of funds phased through to 2020
    rebalancing of Pillar 1/Pillar 2 may remove need
    for modulation
  • Targeting of larger SPS (and RD?) recipients to
    continue


18
OTHER POSSIBILITIES
  • A third Pillar?
  • EU Commission Climate Change (including
    renewable energy)
  • NFU Research and Development
  • More market regulation?
  • more interventionist approach as trade-off for
    less direct aid
  • insurance funds, counter-cyclical payments?
  • derogation for agriculture from EU competition
    laws?
  • import restrictions animal welfare, health,
    carbon etc.?
  • How would this fit with Trade commitments? WTO,
    Mercosur etc.


19
UK IMPLEMENTATION
  • Within EU framework, MS will continue to set
    precise rules
  • More scope for the industry to influence at this
    level?


20
UK NATIONAL ENVELOPES
  • Article 68 allows funds to be skimmed for
    specific purposes
  • improving quality and marketing of agricultural
    products
  • enhancing animal welfare
  • supporting farming that is important for the
    environment
  • contributions to insurance funds risk
    management, animal and plant diseases
  • others may be added post-2013
  • Not widely used in the UK under the Health Check
  • Will DEFRA be tempted to use this if money is
    tight? unlike Rural Development needs no
    co-financing
  • WFD and Hill Support mentioned
  • Would the industry support any such use?

21
UK RURAL DEVELOPMENT
  • What should be the balance between Pillar
    1/Pillar 2 in UK?
  • Should/will the UK be able to shift money to
    Pillar 2 with continued voluntary modulation?
  • Schemes for 2014-2020 need to be put forward
  • Change in balance of English RD programme
    (currently 70 environmental)?
  • Environmental Stewardship likely to remain
    largest beneficiary of RD money
  • Does the ES need changing?
  • higher (ELS) payments - move away from income
    foregone?
  • scheme between ELS and HLS?


22
FUTURE SPS IN FIGURES
  • For 2013 assume a) reduction in UK SPS funds b)
    a re-distribution of funds to the hills c) lower
    voluntary mod.
  • Gives a payment of 200 per Ha (80 per acre)
  • By 2020, larger cut in SPS funding phased-in plus
    other deductions to pay for new members
  • Possible payment down to 110 per Ha (45 per
    acre) (1 85p)
  • If Pound strengthens then 85 per Ha (34 per
    acre) (1 65p)
  • Scots/Welsh businesses likely to suffer steeper
    reductions

23
EVOLUTION OF THE CAP
24
CONCLUSIONS / IMPLICATIONS
25
WHY THIS REFORM MATTERS
26
SUMMARY
  • Single Payment at current levels time-limited
  • More RD money available but more cost
    involved in accessing this
  • Reduction in SPS will remove profitability on
    many farms
  • To replace lost SPS, businesses can
  • hope that market prices improve, or
  • reduce costs / improve efficiency

27
CONTACT INFO
Richard King
Partner Andersons Research Team
01664 503200
rking_at_theandersonscentre.co.uk
28
FARM SUPPORT AFTER 2012
RICHARD KING
  • June 2010

29
UK200Agricultural Group Specialist Training
Course
  • Wednesday 23 June 2010

30
Renewable Energy Grasp the Opportunity
  • David Harries
  • Head of Renewables
  • Aaron Partners LLP

31
Renewables are not new
32
and closer to home
33
So why is renewable energy such a hot topic?
  • Climate Change
  • Technical Developments
  • Recognition of Resource
  • Ageing Conventional Generators
  • Energy Security

34
Existing Generation
  • Coal supplied over 50 of winter consumption
    2008/9
  • 70 of our coal imported
  • 50 from Russia
  • Average coal station over 40 years old
  • 6 of 19 coal stations scheduled to close by 2015
  • 1/3rd of UK generation to close within 10 years

35
Energy Security
36
Government Policy
  • UK government targets
  • 10 by renewables by 2010
  • 15 by 2020
  • 80 reduction in carbon emissions by 2050

37
Government Policy
  • In reality, economically driven
  • 3 square meals from anarchy
  • In response, Government policy has made renewable
    energy a good investment

38
The Economics
  • You sell your energy
  • You get paid the market price plus ROCS and LECS
  • or FITS
  • A levy on the power generation industry
  • Ultimately paid for by higher consumer prices

39
ROCS Economics
  • ROCS
  • Renewables Obligation Certificates
  • Base price set by government but can be traded
  • Targeted to encourage particular developments

40
ROCS Economics
  • What is paid for generation
  • Base price currently c. 45/MWh
  • ROC price up to c. 50/MWh
  • LEC price 3.50/MWh

41
ROCS Economics
  • Number of ROCS for
  • Onshore Wind 1
  • Offshore Wind 1.5
  • Hydro-electric 1
  • Wave / Tidal 2
  • Solar Photovoltaic 2
  • Anaerobic Digestion 2
  • Landfill Gas 0.25

42
ROCS Economics
  • Energy from Waste with CHP 1
  • Co-firing of Biomass 0.5
  • Co-firing of Energy Crops 1
  • Co-firing of Biomass with CHP 1
  • Co-firing of Energy Crop with CHP 1.5
  • Dedicated Biomass 1.5
  • Dedicated Energy Crops 2
  • Dedicated Biomass with CHP 2
  • Dedicated Energy Crops with CHP 2

43
ROCS Economics
  • Assuming wholesale, ROCS and LECS at up to
    100/MWh
  • 1MW AD plant
  • at 80 efficiency
  • 7,000 MW pa
  • 700,000 pa

44
ROCS Economics
  • 1MW wind farm
  • at 33 efficiency
  • 2,890 MW pa
  • 289,000
  • 10MW 2,890,000

45
Feed-in Tariffs
  • Aimed at smaller generators
  • Maximum 5MW
  • Will run alongside the ROCS system
  • Came into force 1st April 2010
  • Can apply to retrospectively to schemes built
    after 15 July 2009

46
Feed-in Tariffs
  • Payable in two components
  • Generation Tariff according to type
  • Export Tariff _at_ 3p/kWh regardless of type

47
Feed-in Tariffs
  • Generation Tariffs (pence / kW) for
  • Hydro-electric lt15 kW 19.9
  • Hydro-electric 15-100 kW 17.8
  • Hydro-electric 100kW 2MW 11.0
  • Hydro-electric 2MW 5MW 4.5
  • (Note gt5MW ROCS)

48
Feed-in Tariffs
  • Generation Tariffs (Pence / kW) contd
  • Wind lt1.5kW 34.5
  • Wind 1.5 15kW 26.7
  • Wind 15 100kW 24.1
  • Wind 100 500kW 18.8
  • Wind 500kW 1.5MW 9.4
  • Wind 1.5 5MW 4.5

49
Feed-in Tariffs
  • Generation Tariffs (Pence / kW) contd
  • Anaerobic Digestion lt500kW 11.5
  • Anaerobic Digestion 500kW 5MW 9.0
  • Solar PV retrofitted lt4kW 41.3
  • Solar PV new build lt4kW 36.1

50
Feed-in Tariffs
  • Payments linked to RPI
  • Income tax exempt for energy used domestically
  • Intended to deliver approximate rate of return
    of 5 8 for well sited installations

51
ROCS v. FITS
  • FITS are fixed rate, ROCS fluctuate although
    fixed for period of Power Purchase Agreement
  • FITS pay for energy you use yourself, ROCS do not
  • From 1st April 2010, under 50kW FITS only

52
ROCS v. FITS
  • Generally
  • Small generator / self use FITS
  • Large generator export ROCS

53
FITS Bureaucracy
  • Installations have to be MCS Compliant
    (Microgeneration Certification Scheme)
  • Support is for new schemes
  • Ofgem still feeling its way and under-resourced

54
FITS Economics
  • 50kW hydro-electric plant at 60 efficiency
  • (at 17.8p / kW base, all exported)
  • 262,800 kW pa
  • 54,662.40 pa
  • Potentially tax free!

55
FITS Economics
  • 15kW wind turbine at 30 efficiency
  • (at 26.7p / kW base, all exported)
  • 39,420 kW pa
  • 11,707.74 pa

56
The Renewable Heat Incentive
  • Due to come in 1st April 2011
  • Intended to incentivise renewably generated heat
  • Same mechanism as FITS
  • Will apply to new equipment installed after 15
    July 2009
  • Transitional arrangements to be put in place for
    the time being
  • Anticipates 12 investment return (6 for solar
    thermal)

57
The Renewable Heat Incentive
  • Eligible technologies
  • Biomass
  • Biogas
  • Ground and air source heat pumps
  • Solar Thermal

58
The Renewable Heat Incentive
  • Proposed tarriff examples
  • Biomass up to 45kW 9p/kW, 15 years
  • Biogas up to 45kW 5.5p, 10 years
  • Ground source heat pump up to 45kW 7p, 23 years
  • Solar Thermal up to 20kW 18p, 20 years
  • Ground source heat pump 350kW 1.5p, 20 years

59
More Economics
  • Capacity to gild the lily
  • Combine with cost saving eg. avoiding gate fees
    for waste
  • Or with other capital projects, eg consider AD
    when planning new slurry handling / storage
    facilities
  • Combine forces enter into partnerships to
    maximise resource.
  • Use the energy yourself

60
Do you DIY?
  • Why not?
  • Lack of knowledge
  • Lack of cash
  • Lack of time
  • Risk of mistakes
  • Complexity
  • Scale

61
Do you DIY?
  • Why should I?
  • Potentially far greater return
  • Potential to increase prospects of success
  • Retention of control
  • Virtually guaranteed sales revenue
  • Potential for substantial tax savings

62
Tax
  • Rental income unearned income
  • DIY earned income
  • potential for BPR
  • capital allowances on machinery
  • IHT where agricultural land involved minimise
    leased areas to preserve APR
  • Above all dont skimp on tax advice for large
    projects

63
Do you DIY?
  • Middle ground joint venture
  • Uses developers cash (in whole or part)
  • Uses developers expertise
  • Improved returns over leasing
  • Should maintain tax benefits

64
Do you DIY?
  • Value of wind farm on grant of planning
    permission
  • between 200k and 500k per MW of approved
    capacity
  • 10MW windfarm 2M to 5M

65
Do you DIY?
66
Do you DIY?
67
Contact Details
  • David Harries
  • Partner
  • Head of Renewable Energy
  • david.harries_at_aaronandpartners.com
  • Tel 01244 405527
  • Mobile 07970 916517
  • www.aaronandpartners.com

68
UK200Agricultural Group Specialist Training
Course
  • Wednesday 23 June 2010

69
Farm Renewable Environmental Energy Ltd
Anaerobic Digestion
  • A local solution to a global problem

www.fre-energy.co.uk Tel 0845 8330504
70
The world is changing
  • Global warming.
  • Depletion of conventional energy resources.
  • Increasing world food demand.
  • Reduction of fertile land.
  • Financial Instability.

It is not the strongest of the species that
survives, nor the most intelligent, but the one
most responsive to change - Charles Darwin
71
Anaerobic Digestion a natural fermentation process
Renewable Electricity Heat
Biogas
38 C
72
Anaerobic Digestion
A renewable energy process The electrical power
is available 24 hours a day - 365 days a year
i.e. it is not dependent upon the
wind blowing or the water flowing.  
v
A waste management process Cow slurry can
be mixed 5050 with food waste, harvesting the
energy, reducing Landfill, Green house gas
emissions, Odour (by 80), BOD (by 90) and
killing most pathogens. AD reduces cattle Carbon
Footprint by 20. 
v
A nutrient recycling process The end product
(digestate) is an environmentally valuable
organic fertiliser. Which will remove farm
reliance upon energy hungry chemical fertilisers.
30 of the Carbon Footprint of food is down to
artificial fertilisers.  
v
AD ticks all the environmental boxes
73
Waste Materials available for AD
  • The UK produces 110 million tonnes of organic
    waste.
  • 18 m tonnes food waste.
  • 2 m tonnes Sewage sludge.
  • 90 m tonnes of agricultural waste such as manure
    and slurry.
  • DEFRA-DTI-DfT (2007) AND Enviros (2008)
  • This could produce approximately 5 of UK energy
    demand.
  • The resultant material will displace energy
    hungry artificial fertiliser.
  • 30 of the carbon footprint of food is down to
    artificial fertiliser.
  • 82 of the inputs are farm generated 100 of the
    outputs must be returned to farm land.

74
On Farm AD options
  • Just Animal Slurries
  • Low cost, low energy yield.
  • Captures methane, provides hot water, heating
    power.
  • 22 improvement in slurry performance.  
  • 90 reduction in BOD.
  • Animal Slurries and Crops
  • Medium cost, medium energy output.
  • Improved fertiliser value.  
  • Animal slurries and food wastes
  • High cost, high energy output.
  • High nutrient value of fertiliser (will have a
    value in the future).
  • Second revenue stream. (gate fees)
  • Requires waste licences, permits and
    bio-security.

75
How much does AD cost?
  • 1100 m3 Digester 350 Cows 1000t Poultry
    Litter 750t Arable
  • De-gritting and gas agitation.
  • 105 kW CHP (Combined Heat Power)
  • Gas Holder.
  • Loading system, pump, macerator.
  • Approximate Cost erected commissioned
  • Cost 471,000
  • Revenue (Feed In Tarrif) 135,500
  • Running Costs 23,400
  • Profit 112,100 (24)

76
Comparison with wind power
  • Wind turbine typical cost 2.5m for a power
    output of 2,000 kW.

Best sites achieve 35 700 kW 3,570 cost/kW of delivered power
Average sites 25 500 kW 5000 cost/kW of delivered power
  • Anaerobic Digester typical cost 1.2m for a power
    output of 500 kW

Plant efficiency 92 490 kW 2,450 cost/kW of delivered power
Cost/kW AD less than half that of the average
wind turbine.
77
FRE-Energy Lodge Farm digester running for 12
Months.
78
(No Transcript)
79
FRE-Energy USPs
Auto de-gritting Patented Award winning
technology. Efficiency Lowest parasitic load
(80 less than continental systems) Fibre glass
roof Not Fabric, 20 year guarantee. Foam
Alleviation system Greater process
protection. Health and Safety External parts,
no need to work in gas space. UK Manufacture
Support Designed for UK agriculture.
80
  • FRE-Energy ADG system
  • Smart Award wining patented technology
  • As dry matter digests inorganic matter sinks to
    the bottom of the digester gradually filling it
    up, reducing digester capacity.
  • De-gritting removes the limitations on material
    for digestion. i.e. you can still bed on sand or
    ash.
  • You can digest root crops e.g. Potatoes, fodder
    beat.
  • You can digest high grit mucks e.g. Chicken
    litter.

81
  • 3 Years Ash Bedding

82
  • Minimal Parasitic Load
  • Energy used to run the process, is lost.
  • TOTAL parasitic load for an 1,100m³ gas agitated
    digester 2kW approx 1.9W/m³ of
    digester. (excluding loading and unloading)
  • For propeller or jet mixed systems this is
    generally 15W/m³.
  • For an 1,100 m³ digester this is 2kW verses 16.5
    kW. Amounting to
    (14.5 x 24 x 365) 127,000 kWhr per year.
  • At 7 pence / kWhr 9,000 a year.

83
  • Health and Safety
  • There is no need to enter the gas space or break
    the gas seal to maintain any FRE-Energy digester
    parts.
  • Gas pumps are duplicated and external to the
    digester.
  • De-gritting arm is suspended from the digester
    roof with external bearings.
  • All Serviceable Parts are external to the
    digester

84
Benefits to Farming
  • The nutrients in Digestate are in a far more
    available form. There is between 20 25 better
    nutrient uptake. Improvement in fertiliser value
    for 350 Cattle - 7,700pa
  • The AD process kills weed seeds and pathogens
    e.g Foot mouth. TB. Salmonella.
    Coliform Bacteria. dna
  • The Process reduces odour by 80 and BOD by 90
  • Digestate does not taint grass eliminating
    rejection by grazing animals.
  • Digestate from AD with added food / imported
    waste has far greater fertiliser value than
    straight slurry.

85
How is the UK performing?
  • In the last 18 months, only 6 digesters have been
    commissioned in the UK and we are still sending
    food waste to landfill.
  • The UK target is to build 1,000 by 2020.
  • In the last 5 years Germany has built 5,000 AD
    plants producing renewable energy equivalent to
    one nuclear power station.
  • To meet our target we will have to start building
    systems, instead of doing pilot studies and
    commissioning reports.

86
Why so few AD plants?
  • Historically, we have had North Sea Oil Gas
    giving low energy costs and a high level of
    energy security.
  • The government is focused on single big fixes
    i.e. Nuclear Power Large off-shore wind farms.
  • Lack of joined up thinking from the regulators-
    they look at problems in isolation.

Only a handful of Anaerobic Digesters in the UK
due to a lack of effective government support and
the blinkered approach of planners and regulators.
87
AD versus the three Ps
  • Politicians.
  • Are vocal in their support of AD, however the
    message is not getting through to the
    administrators.
  • Planners.
  • Currently view AD as an industrial process best
    suited to industrial estates and not rural
    locations.
  • Power companies.
  • Are keen to encourage renewable generation but
    make it very difficult and expensive to connect
    to the national grid. (Turkeys voting for
    Christmas).

88
Final comment
  • We'll be up to our necks in water, fireballs
    and hurricanes will rage across the sky, but
    there'll still be men in suits telling us we've
    filled the form in incorrectly.

Unfortunately, like cockroaches, I fear they will
be the ones to survive climate change!
89
Farm Renewable Environmental Energy Ltd
Anaerobic Digestion
  • A local solution to a global problem

www.fre-energy.co.uk Tel 0845 8330504
90
  • Future generations will look back at the 20th
    century with embarrassment.
  • The energy resource of 150 million years of
    planetary evolution has been squandered in a
    little over 100 years.
  • It is our responsibility to embrace renewable
    energy solutions sooner rather than later.

91
  • Carbon will become the currency of the 21st
    Centaury
  • In the post oil age, agriculture will play a key
    role in both feeding and powering the planet.
  • The answers to the problems lie in a multitude of
    localised solutions there is no single big fix.
  • The swear words of the next generation will be
  • Globalisation Centralisation

92
Farm Renewable Environmental Energy Ltd
Anaerobic Digestion
  • A local solution to a global problem

www.fre-energy.co.uk Tel 0845 8330504
93
UK200Agricultural Group Specialist Training
Course
  • Wednesday 23 June 2010

94
A BRISK CANTER THROUGH CAPITAL TAX DEVELOPMENTS
FOR MIXED AGRICULTURAL ESTATES
  • by
  • Adrian Baird
  • CLA Chief Taxation Adviser

95
(1) Scope
  • IHT reliefs APR BPR
  • but mainly APR
  • Within IHT APR
  • mainly on occupation new IHTM and Case Law have
    clarified much of the definition of agricultural
    property
  • The continued importance of APR for CGT hold-over
    relief
  • Surrender and re-grants CGT

96
(2) New horizons
  • APR
  • A perceived narrowing of the scope
  • less important?
  • BPR
  • A judicial widening of opportunities
  • more important?

97
(3) Recent APR case law
  • The definitional problem
  • Starke
  • Indicia of character appropriateness
  • Dixon, Higginson, Antrobus 1 (and via Antrobus 1
    to Korner)
  • The problem of the predicate
  • Rosser 1 ( Williams)
  • What is a farmhouse?
  • Arnander

98
(4) What APR case law can do
  • Tell us how to judge whether a house is a
    farmhouse
  • Tell us what is the predicate of the character
    test
  • Tell us what factors (indicia) may suggest a
    farmhouse is of an appropriate character

99
(5) What APR case law cant do
  • When does agricultural property satisfies the
    occupation test in the common, borderline cases
  • Eg., where the farmer is absent, or in ill-health
    or quasi-retired

100
(6) Recent BPR case law
  • You never had it so good
  • BPR can apply to the transfer of assets comprised
    in a business the loss to donor
  • Nelson Dance
  • Not wholly or mainly holding or making
    investments
  • Farmer, George

101
(7) Recent BPR case law
  • Just perhaps it was too good
  • Although active involvement not required for BPR
    this may lead to the holding of investments
  • McCall
  • What comes first the business or excluded
    property?
  • Brander

102
(8) APR is still important
  • APR applies to farmhouses
  • Brave or stupid? 9th Marquees of Hertford
  • The extent of BPR on investment property may be
    curtailed
  • Brander may answer this McCall has already made
    cautions
  • APR status helps CGT
  • the agricultural extension to hold-over relief
    (now apt for FHL)

103
(9) APR The basic structure
  • APR takes priority over BPR and applies to
  • property
  • in UK, Channel Islands Isle of Man, and (22
    April 2009) property in EEA states
  • _at_ 50 or 100
  • on that part of the value transferred by a
    transfer of value that is attributable to the
    agricultural value of agricultural property
  • if, but only if, the occupation test is
    satisfied.
  • APR is given before exemptions grossing up

104
(10) The occupation test
105
(11) The two prerequisites of IHT APR
  • OCCUPATION
  • Someone must be in occupation of agricultural
    property (the principal definition of which is
    agricultural land)
  • AGRICULTURE
  • Agriculture must be the purpose of the occupation

106
(12) Definition of agriculture?
  • APR property (primarily) occupation of
    agricultural land for purposes of agriculture
  • WHAT IS AGRICULTURE? IT INCLUDES
  • Breeding and rearing of horses ( grazing of
    same) on a stud farm
  • Short rotation coppicing (only if in UK)
  • IHTA 1984 ss 115(4) 117
  • FA 2005 s 154

107
(13) Definition of agriculture?
  • Agriculture is not further defined
  • Where land is used for arable or pastoral
    farming then it will be used for agriculture
  • IHTM 24062

108
(14) Farming as a trade
  • All farming or market gardening conducted within
    the UK is treated as a trade for IT CT
  • All UK farming conducted by same person is a
    single trade
  • Farming conducted by a partnership is separate
    from farming conducted by individual partners
  • ITTOIA 2005 s 9(1) CTA 2009 s 36(1)

109
(15) Definition of farming?
  • Farming occupation of land wholly or mainly
    for purposes of husbandry
  • EXCLUDE market gardening
  • INCLUDE
  • Hop growing
  • Breeding and rearing of horses ( grazing of
    same)
  • Short rotation coppicing (only if in UK)
  • ITA 2007 s 996
  • CTA 2009 s 1317

110
(16) The two prerequisites of farming
  • OCCUPATION
  • For a person to be farming they must be in
    occupation of land that is not market garden land
  • HUSBANDRY
  • Husbandry must be the main purpose of the
    occupation

111
(17) An interim conclusion
  • IF land is occupied for husbandry
  • ?
  • THEN the land will satisfy the APR occupation
    test

112
(18) Husbandry
  • Husbandry every industry conducted by a
    husbandsman
  • Husbandsman someone who tills or cultivates the
    soil.

113
(19) Husbandry case law
  • Cavan (Industrial Provident society) bought in
    milk from members.
  • Cavan separated out cream, churned it into butter
    and then sold the butter
  • The buttermilk and skimmed milk returned to
    members
  • Is this husbandry?
  • Cavan Central Co-operative Agriculture and Dairy
    Society Ltd
  • 1917 12 TC 1

114
(20) Husbandry Cavan case
  • Husbandry every industry conducted by a
    husbandsman someone who tilled the soil.
  • but may also include an activity conducted on
    land whose manifest object is the benefit of
    mankind and the support of life...
  • Thomas Tussers 500 Points of Good Husbandry
    (originally published 1557) remains valuable.
  • Many acts of husbandry have ceased to be so
    because under different social and economic
    conditions they are no longer performed by
    husbandsmen

115
(21) Key point
  • husbandry is a word of very wide meaning
  • limitation is that the husbandry activity has to
    be carried on by someone who tills or cultivates
    (ie, performs an activity upon) the soil

116
(22) Consequences
  • Activities normally performed by a husbandsman
    can be husbandry and may thereby be agriculture.
    Examples
  • Short-rotation coppice
  • Growing biomass crops

117
(23) APR Consequences
  • This explanation is consistent with IHTM 24061
  • which links agriculture first to the production
    of food and the tending of livestock but then
  • extends agriculture to the sort of activities
    that an occupier of land using it for food
    production, c., would additionally perform

118
(24) Husbandry and Agriculture similarities
  • Agriculture is based in food production but
    extended to include other activities performed by
    a cultivator of land
  • NB does this explain Wheatley 1998 STC(SCD)
    60? Ie., the non-farm horses are not held by
    cultivators of the land?

119
(25) The meaning of occupation
  • Long correspondence between CLA and IR on meaning
    in relation to share farming
  • IR initially contended that only the share
    operator ( not the landowner) could be in
    occupation of the land thereby farming the land

120
(26) One or more occupiers?
  • Dawson v Counsell
  • Only one occupier
  • (normally) person with exclusive possession
  • (exceptionally) paramount occupier person with
    paramount use at the requisite time
  • 1938 22 TC 149
  • Back v Daniels
  • May be more than one occupier where two or more
    persons have simultaneous paramount use.
  • 1924 9 TC 183

121
(27) More than one occupier
  • After receiving a Counsels opinion, IR agree
    more than one occupier possible
  • The power to exclude others persuasive but NOT
    essential
  • BIM 55055
  • Person who farms is in occupation ? meaning of
    farming imported into APR
  • IHTM 24072 24083

122
(28) More than one occupier
  • The 1991 agreement now in BIM 55055
  • The power to exclude others persuasive but NOT
    essential

123
(29) An occupier of land
  • For a person to be an occupier of land
  • the person must perform some activity in the
    capacity as user of the land AND
  • The person must have a degree of permanent
    physical presence or possession
  • but, by analogy to tenant of house under Rent
    Act, this need not be continuous presence or
    possession (see Ticker v Hearn 1960 1 WLR 406)

124
(30) Occupation and old case law
  • FORSYTH-GRANT
  • Grassland can be occupied by the owner and be
    subject to seasonal agreements provided the owner
    performs acts of husbandry commensurate with
    growing the grass as a crop.
  • 1943 25 TC 369
  • RATIO
  • Landowner was performing some activity
  • as user
  • with degree of permanent physical presence and
    possession
  • The activity performed was husbandry
  • NB Court conflate husbandry and agriculture

125
(31) Extending occupation
  • IHTM 24072
  • Partnership in occupation ? each partner in
    occupation
  • Company in occupation ? controlling shareholder
    in occupation
  • Beneficiary with qualifying interest in
    possession is in occupation

126
(32) Atkinson occupation
  • Partnership occupied farm under tenancy to
    individual partners
  • Senior partner occupied bungalow
  • HELD Partnership occupation of farm sufficient
    to satisfy s 117(b) even though senior partner
    may not satisfy s 117(a)
  • NB Subject to appeal

127
(33) Implications for elderly, c.
  • The occupation test applies throughout period
    immediately before transfer
  • The transferor will often be elderly and/or unwell

128
(34) Implications for elderly, c.
  • a temporary cessation of activity.. may not
    prevent relief provided farmhouse remains
    functionally attached to the farm
  • But a need to be objective in assessing illness

129
(35) Post mortem
  • Watch out for
  • Death Certificates stating Retired
  • Lack of records on the deceaseds level of
    activity
  • or records that show it was minimal!

130
(36) Post mortem
  • Can you supply extensive and detailed analysis of
    the activities actually performed?
  • Remember question on the land may be directed to
    the predicate of the character test
  • If reliance placed upon s117(b) then no BPR

131
(37) Residential care
  • If landowner goes into residential care then
  • ASSESS the likelihood of return realistically
  • THEN consider whether younger generation should
    move into the house quickly

132
(38) Survivors
  • Common scenario of surviving widow
  • ASSESS whether performing an activity on the land
    (NB bookkeeping is not such an activity.)
  • THEN consider how the family might relocate the
    survivor (if need be)

133
(39) The paradox of non-occupation
  • Where the farmhouse is NOT occupied
  • ASSESS whether family members can use the house
    as a functional farmhouse
  • NB they do not have to move in but the
    elderly/infirm owner may have to move out

134
(40) The real message of McCall?
  • Do NOT delay making transfers of property that
    may soon not qualify for either APR or BPR.

135
(41 NB) IHT clawback on lifetime gifts
  • PETS
  • Clawback operates to withdraw relief and affect
    cumulative total
  • Chargeable transfers
  • Clawback operates for purpose of additional tax
    and does not affect cumulative total if within
    NRB _at_ death

136
(41) The right strategy
  • Is additional tax likely?
  • If unlikely ? gift into settlement
  • Reliefs locked in clawbacks unlikely
  • CGT hold-over under s 260
  • Relevant property regime may be comparatively
    benign
  • If likely then CGT becomes a factor for a PET
  • This is the key area where the CGT hol-over
    relief agricultural extension may help

137
(42) And finally
  • Griffiths 2008 STC 776
  • Make gifts void where
  • donor was acting under a mistake of true facts
    (eg., having undiagnosed terminal cancer)
  • donor would have acted differently if true facts
    were known

138
(43) Specific hold-over use
  • Under specific hold-over relief the asset must
    be in trade, c., USE at time of disposal
  • But does this mean the whole asset has to be so
    used?
  • TCGA 1992 s 165(2)(a)
  • CG 66950

139
(44) the 2 apportionment hold-over relief rules
  1. (General rule) where any asset has not been
    wholly used during ownership (includes pre
    31iii82 periods)
  2. (Specific rule) where a building or structure not
    used for any substantial part of ownership

140
(45) The value of the agricultural extension
  • Apportionments do not apply to where the
    agricultural extension operates
  • not in trade use
  • Comprises agricultural property qualifying for
    APR
  • ? important implications for part disposals and
    for use of alternative basis and for whether gift
    is made as PET or not!

141
(46) Let (residential) property
  • The agricultural extension and its
    implications for apportionments are important
    where let, non-agricultural property (eg.,
    residential property) is gifted as a
    PART-DISPOSAL of an asset.
  • Where the part-disposal includes let
    agricultural property the consequences are
    significant.

142
(47/48/49) Example of hold-over
  • Farm own as one asset since 1970 includes
  • cottage occupied by farm worker until 1975, then
    ASTs to be gifted to son in 2010
  • 250 acres let farmland
  • outbuildings in non-ag. use (but trade use) after
    1975
  • Gift is PET ? TCGA 1992 s260 does not apply
  • If cottage gifted alone then no s165 relief (non
    in use at time of gift)
  • Disposal with outbuildings strict basis ?
    apportion gains to cottage then to pre and post
    1975 ownership periods ? one-eighth (5/40 years)
    deferral possible

143
(50/51/52) Example of hold-over contd
  • Farm own as one asset since 1970 includes
  • cottage occupied by farm worker until 1975, then
    ASTs to be gifted to son in 2010
  • 250 acres let farmland
  • outbuildings in non-ag. use (but trade use) after
    1975
  • Disposal with 20 acres of farmland strict basis
    ? reduction for IHT APR would be made if it were
    a chargeable transfer ? whole gain on cottage
    qualifies for deferral
  • If alternative basis used then consider
    re-establishing APR on cottage
  • NB no PPR restriction

144
(53) Surrenders and re-grants
  • Possible to effect an express surrender and
    re-grant of 1986 Act agricultural tenancy so that
    re-grant still governed by 1986 Act
  • Agriculture Act 1995 s 4(1)(g)

145
(54) CGT implications for tenant?
  • Does tenants surrender (disposal) give rise to
    a significant capital gain?

146
(55) Possible answers?
  • ESC D39
  • Certain extensions to leases not a disposal
  • BUT HMRC state
  • re-grant not an extension
  • Sargaison
  • Is it a part-disposal which is for nil
    consideration
  • (via CGT 70774)
  • BUT HMRC state
  • re-grant not a
  • part-disposal

147
(56) HMRCs view?
  • Value of surrendered tenancy value of re-grant
  • Re-grant does not have significant value (Walton)

148
THANK YOU FOR YOUR ATTENTION
  • Adrian Baird

149
UK200Agricultural Group Specialist Training
Course
  • Wednesday 23 June 2010

150
Gruesome Tales from the Countryside
151
Midsomer Murders? - Gruesome Tales from the
Countryside
  • Simon Morgan Fellow of the Agricultural Law
    Association Bright Sons, Witham, Essex
    01376 512338

152
(No Transcript)
153
Wills and Lasting Powers of Attorney
154
Gruesome Tales from the Countryside
155
Adverse Possession
  • Continuous user as of right for 12 years
    un-registered land - 10 years for registered land

156
Section 31(6) Highways Act 1980
  • Map and Statement valid for 10 years

157
Village Greens
  • Significant number of locals using an area for
    sports or past times 20 years use as of right
    no 31(6) remedy

158
Gruesome Tales from the Countryside
159
McKaskie v Cameron (2009)
160
Risk Assessment Take advice
161
Gruesome Tales from the Countryside
162
Criminal Justice and Public Order Act 1994
  • Sections 61 and 62A

163
Animal Welfare Act 2006
164
Cross Compliance Default 2006 2007 2008
Cattle Identification 1419 1213 1286
Sheep and Goat Identification 72 178 218
Animal Welfare N/A 143 204
165
The End
166
UK200Agricultural Group Specialist Training
Course
  • Wednesday 23 June 2010

167
UK200Group Agriculture 23rd June 2010
  • James OMahony
  • Head of Agribusiness

168
Reasons to be Cheerful?
  • The Strength of UK Agricultures Balance Sheet
    (2005 in brackets)
  • Total Assets 215bn (141bn)
  • Bank Borrowing 12bn (8.5bn)
  • Other Borrowing 4bn (2.5bn)
  • Gearing 7.5 (7.8)
  • Source DEFRA/Bank of England

169
The PL Account
  • Sector by Sector
  • Wide range of performance in each sector.
  • Some common trends
  • Scale / Size
  • Profitability as a prime driver of business?
  • Impact of non agricultural incomes
  • New income Generating opportunities

170
What has changed?
  • Permanent
  • Need to price for risk
  • Cash flow focus- requirement for customer
    ownership
  • Better business management
  • Business Banking is not just order taking a
    partnership as trusted adviser
  • Temporary ( maybe )
  • Increased Cost of Funds ( Libor, deposit rates
    and cost of capital )
  • Market Liquidity
  • Increase in difficulty in debt servicing and
    repayment (for some)
  • Effects of global recession

171
What has changed? (2)
  • Different Banks are in different positions and
    have different lending and pricing policy
    responses from each other and from the past .
  • Capital management , risk appetite , reward ,
    terms conditions have changed (
    substantially in some cases ).
  • Changes in team structures for some lenders.
  • Fewer Players in the Market (will they return?)

172
What are we looking for?
  • C character
  • A ability
  • M Means
  • P Purpose
  • A Amount
  • R Repayment
  • I Insurance

173
What are we looking for?
  • Especially in relation to Renewable Energy
    Opportunities
  • What will you need the basics
  • What are you looking to do?
  • Why do you want to do it?
  • Have you written a business plan
  • Professionals involved
  • Costs
  • Cashflow / Payback
  • Consents
  • Grants
  • Sensitivity
  • What is the impact on the existing business
  • DO NOT TAKE YOUR EYE OFF CORE BUSINESS

174
Managing Risk - Interest Rate Protection?
  • Indicative fixed rates available
  • ( Based on 2,000,000, Capital Interest Fully
    Amortising loan with 1/4ly Repayments EXCLUDING
    bank lending margin)
  • 5 yr Fixed Rate 2.60
  • 10 yr Fixed rate 3.40
  • 15 yr Fixed Rate 3.70
  • 20 yr Fixed Rate 3.75
  • 3 month LIBOR 0.73

175
Opportunities
  • Historically low interest rates
  • Good time to invest and borrow
  • Industry prospects stable
  • Favourable exchange rate
  • Risk can be reduced by hedging
  • Strong land prices (security)

176
Key Messages
  • Capital should not be a constraint for most sound
    established farms.
  • UK Agriculture has exceptionally strong balance
    sheet and excellent bad debt record (low!)
  • Apply sensible and realistic sensitivities to
    your plans.
  • Make sure you communicate with your bank and at
    all stages
  • Sound, well thought out funding requests should
    achieve bank funding.
  • INVOLVE US EARLY!!!
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