Statement of Practice D18
Published 1 January 1978
© Crown copyright 1978
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The Revenue Law Committee of the Law Society raised with the Commissioners for HM Revenue and Customs (HMRC) a problem arising out of the widely drawn provisions of section 30, which was causing concern among those dealing with agricultural properties.
The Committee pointed out that there are instances where a farmer who owns the land he farms may decide to retire and may wish to hand over the farming business, possibly to his son, while raising capital for himself. He therefore enters into 2 transactions:
- (a) lease of the farm at a rack-rent to his son on normal agricultural terms
- (b) sale of the freehold, subject to the lease to the son, to an outside investor, often an institutional buyer
The market price paid by the institution is for the tenanted value of the property and this is the value on which the retiring farmer pays Capital Gains Tax. He will undoubtedly have reduced the value of his asset by the grant of the tenancy and as a result paid Capital Gains Tax on a tenanted rather than vacant possession value basis.
The Commissioners for HMRC have now confirmed that in the precise circumstances mentioned above they would take the view that Taxation of Chargeable Gains Act 1992 section 30 cannot and should not apply and accordingly that they do not regard that section as giving rise to an increased charge to Capital Gains Tax when a farmer enters into the 2 transactions mentioned.