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Tenant farmer

22 August 2007
Issue: 4122 / Categories: Forum & Feedback

A farmer has been the tenant of a farm since before 31 March 1982 under a protected Agricultural Holdings Act tenancy. The farm was owned by his mother. On her death in 2005, the freehold reversion passed in equal shares to the farmer and his four (non-farming) brothers and sisters. The farmer now wishes to retire and the intention is to sell the farm with vacant possession. In view of the family relationship, the farmer does not wish to claim compensation for relinquishing his tenancy and is happy to settle for his one-fifth share of the proceeds.

A farmer has been the tenant of a farm since before 31 March 1982 under a protected Agricultural Holdings Act tenancy. The farm was owned by his mother. On her death in 2005 the freehold reversion passed in equal shares to the farmer and his four (non-farming) brothers and sisters. The farmer now wishes to retire and the intention is to sell the farm with vacant possession. In view of the family relationship the farmer does not wish to claim compensation for relinquishing his tenancy and is happy to settle for his one-fifth share of the proceeds.
For capital gains tax purposes I would normally regard the tenancy and the freehold reversion as having merged on his mother's death so that the 1982 value of the tenancy and one-fifth of the probate value of the freehold reversion would form the deductible cost of the asset. But...

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