Investors in Scottish farmland should consider long-term tax implications

INVESTORS who are seizing opportunities to acquire Scottish farmland and estates as safe, long-term investments are being warned poor tax planning could create a financial nightmare.

“We are increasingly seeing investors who have amassed their fortune in London or overseas purchase a Scottish estate, attracted by our beautiful scenery and the hunting, shooting, fishing lifestyle,” said chartered accountants Chiene and Tait partner Helen Mackenzie.

Speaking at the Scottish Land and Estates (SLE) annual taxation event in Perth, she said with investments of this nature, there could be a lot of unforeseen considerations, such as the heritage of the property, succession issues to retain the estate within the family, and working together with the local community.

She said it was crucial to ensure at the outset that while current income was maximised, it was not at the expense of long- term capital tax advantages.

“Notwithstanding that, it has become difficult to generate profits from a traditionally operated agricultural estate; diversification schemes that have been developed in recent years have changed this,” said Ms Mackenzie.

Land use

“The current use of land can determine the long-term capital tax treatment. If land is used for trading or agricultural purposes, 100 per cent business and agricultural property relief will be available for inheritance tax purposes. Capital gains tax reliefs are also available.

“However, if land is used to generate investment income, which includes rental for wind turbines, the tax favoured status may be lost,” she warned.

A recent industry report showed 22 estates were sold in Scotland last year - five more than in 2010.

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