Subsidies and the country house owner

    Subsidies and the non-farmer

     

    What’s in the headlines?
    Wealth Taxes have been in the headlines since the Coalition Spring Budget with key measures being proposed for a Mansion Tax, the closure of loop holes avoiding Stamp Duty and the removal of VAT savings for improvements for listed buildings.  Some of these are still out for consultation but lurking behind the scenes are changes to agricultural subsidies which might well affect country house and land owners.

    The end of farm subsidies?
    The farm subsidy system is currently under review as a part of the Common Agricultural Policy (CAP) reforms, expected to take effect in 2014.  Although details are regularly changing, it is clear that the emphasis for eligibility is on the farmer/grower.  There are two proposals to ensure that claimants are ‘farming’.  Firstly, the income from subsidy must be at least 5% of the claimants non-agricultural income.  Additionally, there will be a requirement to ensure that the claimant is actually farming.  This may well preclude some landlords.

    Woodland grants
    Woodland grant schemes are a valuable subsidy available to those planting or managing woodland.  Additional payments can be obtained where land is taken from agricultural use.  Where an applicant receives less than 25% of their income from agriculture, rates for Farm Woodland Payments are reduced by 50% from £300 per hectare to £150 per hectare (£121 to £60 per acre).  This is not immediately obvious when applications are made and can sometimes only become apparent at a late stage when budgets have been completed and trees planted.

    Do incomes need to fall?
    These reduced income streams may affect the typical country house owner who derives primary income from elsewhere and does not have day to day involvement with the husbandry of the land.  There are ways in which these subsidies can be legitimately claimed, such as through setting up a farming business where the sole activity is farming and ignores other incomes of the beneficial owner.  The farm business could be registered for VAT allowing savings on management of the land.  Specific advice should always be taken to establish the viability of such a business.

    Is it worth it?
    Single Farm Payment is typically worth approximately £210 per hectare (£85 per acre), per annum. Environmental subsidies, where eligible, can add £30 per hectare (£12 per acre) for the Entry Level Scheme and up to £300 per hectare (£121 per acre) typically for the Higher Level Scheme.  These schemes can be applied for independently of SFP.  For an individual owner, this income would normally be taxed as part of their income, meaning that for some, the administration of these schemes is not worthwhile when they will be taxed by up to 50%.  This is a matter of personal choice.  Setting up a business to become eligible for subsidy payments can be worthwhile although this should be considered on a case by case basis.

     
     

    Key contacts

    Philip Eddell

    Philip Eddell

    Director
    Country House Consultancy

    Savills Newbury

    +44 (0) 1635 277 709

    +44 (0) 1635 277 709