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Replies to Queries

08 September 2004
Issue: 3974 / Categories:


Readers' Forum


Replies to Queries — 3


Family farming



Readers' Forum


Replies to Queries — 3


Family farming


We have recently taken on two new farming clients. The first is a father and son partnership, the father having previously gifted the son the entire farm and a nominal rent on an old lease has been charged back by the son before profits are taken equally (previously the father had charged back the same figure when he was the landlord). Our question is, are there reservation of benefit problems or does the fact that a rent is charged show some sort of 'first charge' on profits in favour of the son? Alternatively, if the father were to leave the partnership to show full value in the gift, would the rent cease with no tax consequences as landlord and tenant would be identical?


Our second client is also a family farming partnership, but consisting of mother, father, son and daughter-in-law. Other than as noted below, mother and father gifted away all the land and buildings several years ago to the son, but have retained the same profit share. As above, we are wondering if this is a reservation of benefit and, if so, can it be rectified by future profits being lower to reflect the gift or should they come out of the partnership?


To compound the problem, the senior couple also own the farmhouse which they have not lived in for many years as the son and daughter-in-law live there. Is there any way this can be removed from their estate given that it does not qualify for agricultural property relief as there is no land?


Readers' thoughts on these scenarios are welcomed.


(Query T16,474)

Issue: 3974 / Categories:
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