Institutional investors have been buying agricultural land for years as a result of sustained improve in demand for food, feed and fuel, and lack of supply of excellent land. This has ensured that UK farm land investment has returned an annual average of around 10% in capital progress, while additionally permitting traders to capture earnings in the form of lease charged to farmer working the land.
Agricultural land investment within the UK also offers buyers with a lot of tax planning advantages such a IHT reduction and business relief, now we will add Capital Beneficial properties Tax to the record of advantages that UK farm land investment has over the more traditional residential buy to let mannequin. Arable land, when rented to a farmer who works the land, qualifies as a business, and therefore will fall into the lower band of Capital Positive factors Tax under the brand new Lib/Con Government.
So what does this mean for investors? Nicely in essentially the most fundamental phrases, it means that a revenue of A�50,000 generated from the sale of a residential property would incur a tax invoice of A�20,000, while the same revenue generated from the sale of a farm, of working farm land, would incur a tax invoice of solely A�9,000, which means that the same revenue would depart the farm land investor better off by A�eleven,000.
All of that of course is a sideline to the fact that UK farm land has increased in worth every year for ten years at an average ate of about 10% in keeping with the Royal Institute of Chartered Surveyors, and is but nonetheless only half the value of farm land in Ireland, Holland and Denmark, leaving a huge margin for progress, not to mention the income stream created by renting the land to a farmer (we are attaining 7% every year in 2010).
Whenever you consider the related prices of buying running and promoting a buy to let property n the UK, and add the 40% tax invoice at the backend, it would appear that a farmland investment would make a much more sensible choice for the investor hungry for growth, earnings, and a good deal on tax.
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