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    £7m for two major Penrith projects

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    Man arrested after police drugs raid in Penrith

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    Man fined after abandoning car at Penrith Railway Station for several weeks

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    Appleby Show team rallies round as treasured event under threat

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    Gold for Keith in annual festival of orienteering

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    Cumberland and Westmorland wrestlers head to European championships

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    Kirkby Stephen Hockey Club win league title

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    Dedicated Eden football volunteer wins major award

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Cumberland and Westmorland Herald
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    Turning 75: the impact on tax-free cash, pension tax relief and death benefits

    Turning 75: the impact on tax-free cash, pension tax relief and death benefits

    Appleby Horse Fair 2025: ‘Extensive’ police measures in place

    Appleby Horse Fair 2025: ‘Extensive’ police measures in place

    Man exposes himself near Penrith car park

    Man exposes himself near Penrith car park

    £7m for two major Penrith projects

    £7m for two major Penrith projects

    Appleby flood scheme work to pause for town’s horse fair

    Appleby flood scheme work to pause for town’s horse fair

    Man arrested after police drugs raid in Penrith

    Man arrested after police drugs raid in Penrith

    Man fined after abandoning car at Penrith Railway Station for several weeks

    Man fined after abandoning car at Penrith Railway Station for several weeks

    Appleby Show team rallies round as treasured event under threat

    Appleby Show team rallies round as treasured event under threat

    Big splash as Lazonby Pool reopens after revamp

    Big splash as Lazonby Pool reopens after revamp

  • Sport
    New boss revealed for Penrith AFC

    New boss revealed for Penrith AFC

    Penrith Panthers celebrate winning season

    Penrith Panthers celebrate winning season

    Darren Edmondson leaves Penrith AFC

    Darren Edmondson leaves Penrith AFC

    Lucy plays key role in county T20 triumph

    Lucy plays key role in county T20 triumph

    Gold for Keith in annual festival of orienteering

    Gold for Keith in annual festival of orienteering

    Cumberland and Westmorland wrestlers head to European championships

    Cumberland and Westmorland wrestlers head to European championships

    Kirkby Stephen Hockey Club win league title

    Kirkby Stephen Hockey Club win league title

    Dedicated Eden football volunteer wins major award

    Dedicated Eden football volunteer wins major award

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    10-year-old footballer Casper Ostrowski snapped up by Morecambe

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Home Farm and Countryside
This article appears as part of a paid partnership with Armstrong Watson

Are you an active farmer?

By David Threlkeld, accounting partner, Armstrong Watson LLP

by CWH
10 August 2023
in Expert advice, Farm and Countryside
A A
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David Threlkeld

Asking someone who has lived and worked on the same farm for most of their life whether they are a farmer can provoke a puzzled look.

However, where the farmer is now doing less work on a daily basis and a neighbour is grazing the land, HMRC may argue that you are no longer an active farmer.

There are tax issues that can arise if you are deemed to be renting out your land rather than farming it yourself. The first point to make is that it does not matter what an agreement is called — grass letting, grazing licence, contract farming, etc — it is what happens in practice that will determine the tax treatment.

In simple terms, everything hinges on who is deemed to be carrying out acts of husbandry. For example:

  • If the landowner fertilises the land, controls weeds, reseeds when necessary, etc then they should be classed as the farmer. In such cases, the grazier is merely allowed to bring his animals on to the land to eat the grass.
  • If the grazier is responsible for all the above tasks then they will be deemed to be the farmer. The landowner is not carrying out any acts of husbandry and the land will now be treated as an investment asset.
  • A further issue is whether the landowner is taking a commercial risk. If a farm has fixed income and minimal expenses, this looks like a rental business. Conversely, a business with variable income and expenses is more likely to be accepted as a trading business.

Tax issues to consider

  • It may be possible to pay a lower rate of Capital Gains Tax on a sale of land — 10 rather than 20 per cent — if it has been actively farmed. Likewise, the deferral of CGT by purchasing replacement land is only possible if the land has been actively farmed.
  • Agricultural land which is rented out can still qualify for 100 per cent Inheritance Tax exemption. However, in order for a farmhouse to qualify it is necessary that the person living in the house is a working farmer. This will be difficult to prove if the grazier is carrying out all the acts of husbandry.
  • For Income Tax purposes there are a number of disadvantages of being classed as a non-farmer. These include not being able to offset as many expenses, restrictions on the offset of losses, and the inability to claim farmers averaging.
  • For VAT purposes there is a distinction between the receipt of rent (normally exempt from VAT) and the provision of a grazing licence (zero-rated animal feedstuffs). This can not only mean that a rental business cannot claim back VAT on expenses but should not be VAT registered.

In every case, the circumstances will be different and so it is important to take specialist advice to ensure you are aware of the tax treatment for your business.

For more information and support please call 0808 1445575 or email help@armstrongwatson.co.uk

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