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Property tax warning for farmers

A legal expert who specialises in advising the rural sector is warning farmers of a potential cost if they purchase a residential property while still retaining part ownership of a farm.

Andrew Holden, head of Rural at regional law firm Napthens solicitors, reports that he has advised a number of clients in the rural community on this topic.

The issue has arisen when someone who already has part ownership of a farm, perhaps with his parents or other family members. This ownership will usually include a farmhouse, but the farmer may not necessarily live in the property.

When the farmer comes to buy another home to live in themselves, they will potentially be liable for a 3 per cent Stamp Duty Land Tax (SDLT) surcharge due to their interest in the farmhouse.

Andrew Holden revealed there is only one option to mitigate this tax liability, but in many cases it may not be possible or desirable.

He explained: “These are fairly common circumstances, and we have seen a marked number of inquiries about the issue in recent months.

“There is not much that can be done except for the farmer to divest his interest in the farmhouse prior to buying the second residential property.

“Clearly if someone is a part owner of a family farm with their parents or siblings this won’t be possible.

“This situation demonstrates how important it is to be aware of the legal issues facing rural operators and be clear about the various liabilities which might be faced.

“SDLT liability is a significant sum on the purchase of a property, but one that can be planned for if it is known about well in advance.”

Andrew Holden, Rural Solicitor for Cumbria and Lancashire