With the reduction of Agricultural Property Relief (APR) and Business Property Relief (BPR) to £1m per person, assets that were previously of less relevance such as livestock and deadstock, development or hope value and tenancy valuations are now a crucial part of the valuation process.
In my last blog post, I reviewed how the valuation of livestock and deadstock will be a crucial part of valuing a farm business going forwards. In this blog, I will cover how land with development potential or ‘hope value’ is treated.
The most common area for ‘hope value’ on farm is in traditional farm buildings. Even without any planning consent, these may have ‘hope value’. ‘Hope value’ is an assessment of how much more a buyer would pay due to the potential to develop the buildings. ‘Hope value’ could also exist on land that has potential for housing or other non-agricultural uses.
The ‘hope value’ element of the valuation could theoretically get BPR (not APR) but with the reduced limits and uncertainty over any asset’s development potential it is worth considering restructuring any land or building with ‘hope value’ where the development prospects may improve or be crystalised.
Taxpayers have previously argued that ‘hope value’ is low or non-existent and lost this argument in tribunals. A careful assessment of the planning and development potential is important to provide context as to the presence or absence of any development potential.
As I have mentioned before, making the best of the change to IHT will probably require the input of several professionals, with a land agent, tax advisor and solicitor working collaboratively. However, the starting point for mitigating the impact on a business is still an informed valuation.
Contact us to day to book your ‘Asset review and valuation’ and get clear advice on how to proceed.