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UK emergency Budget good for land prices which are already performing well

Land prices could be driven up even further by changes to capital gains tax announced in yesterday's UK emergency Budget, it is claimed.

(Source: www.propertywire.com, 23 Jun 2010)

Land prices could be driven up even further by changes to capital gains tax announced in yesterday’s UK emergency Budget, it is claimed.

According to Simon Dixon Smith of consultants Savills farmers and landowners have enjoyed a surprisingly benign capital tax regime and forward planning will allow future liabilities to be kept to a minimum under the change which has increased CGT to 28% for higher rate tax payers.

‘The increase is perhaps a fair compromise but although the lack of any taper or indexation will be a disappointment to long term holders of assets the change in CGT may drive up land prices further,’ he explained.

‘As the economy picks up and new capital gains are generated we could see a resurgence of interest in rollover relief into agricultural land, particularly from business sellers looking for a new asset class that is seen as a safe haven and Inheritance Tax efficient.’ he added.

He pointed out that one of the reasons for the current lack of supply of farmland in the market is the tax disincentive to sell on retirement. If a farm qualifies for Agricultural Property Relief and Business Property Relief then on death all previous capital gains are written off and the asset can pass down without Inheritance Tax.

But the Chancellor’s decision to increase entrepreneur’s relief to £5 million means that the vast majority of farmers would be able to retire and sell with Capital Gains Tax restricted to 10%. ‘Tax planning thereafter can ensure that any future Inheritance Tax liability is kept to a minimum,’ he said.

The prognosis comes as the latest report on farmland property shows it has outperformed the commercial markets for the third consecutive year.

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