Why Farmers Always Have Spanking New Tractors they Dont Really Need

Farmers Weekly

Agricultural land surrounding urban areas is commanding huge price premiums from property developers and leading to price spikes locally.

Well-positioned parcels with planning permission have sold for as much as £1m/acre in the south of England and £600,000/acre further north, while land in north Wales has gone for 50 times its agricultural value.

Agents say that a growing population and more confidence in the economy is leading to greater development activity, while the government’s National Planning Policy Framework (NPPF) is helping developers appeal local planning decisions.

Top tips for selling development land

  • Proceeds from the sale of development land can be rolled over into qualifying assets like land, buildings and fixed plant and machinery. To qualify for full capital gains tax relief all proceeds must be invested (normally) within three years.
  • Assets purchased from land sales can sometimes be passed down to the next generation after a certain period, holding over the gain.
  • Take advice and be properly represented – initial offers can be misleading and even small improvements can make a huge difference.
    Rob Selley, associate, AC Mole & Sons
  • Land promotion agreements are generally better than option agreements – the landowner retains the land and is actively involved in the sale process. The land is offered to the open market and competitive bidding can see variations of 30% or more between the highest and lowest bids.
  • Choose a promoter carefully – check their track record and financial standing.
  • Ensure all cost and risk sits with the promoter.
  • Ensure there is an arrangement with any other owners of land involved in the scheme, which will divide the proceeds and sale costs.
    Charles Meynell, partner, Fisher German

Developers are approaching farmers with “option agreements”, where they agree a price, but only buy if a planning application is successful. Also increasingly common are promotion agreements run by middle-men who market the land to groups of developers.

Typically, farmers who sell land to developers are reinvesting in business assets to avoid capital gains tax.

In some regions, this rollover relief has led to buyers paying above market value for land, leading to price spikes in the local market.

Another example of how the anomalouss treatment of land in capital gains distorts the market.

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