In the piece, the firm warned that investors who are seizing opportunities to acquire Scottish farmland and estates as safe, long term investments are being warned poor tax planning could leave them facing a financial nightmare.
Chiene + Tait said that while the trend for buying Scottish farms and estates remains strong, particularly among wealthy London entrepreneurs, these investors may not be aware of the best way to make the land work for them.
Partner Helen Mackenzie was a key speaker about the potential pitfalls of agricultural estate investment at the Scottish Land and Estates (SLE) annual taxation event in Perth on January 20, of which Chiene + Tait was a main sponsor.
She said: “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.
“Agricultural estates are particularly attractive to wealthy entrepreneurs who wish to invest in something ‘tangible’ rather than shares and securities over which they have no control.
“But it is important to know that with investments of this nature, there can 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.
“For example, it’s crucial that the purchasers of an agricultural estate or grouse moor takes advice at the outset to ensure that whilst current income is maximised, this is not at the expense of long term capital tax advantages.
“Ownership structures will also have an impact on the tax position and although we appreciate that buyers may not expect an immediate return on their investment, the longer term tax and succession issues will have a vital role in ensuring a successful business long term.
“By working closely with a tax advisory team and ensuring that the right structures are put in place from the outset, estate owners and local rural businesses can develop and prosper.”
A recent industry report showed 22 estates were sold in Scotland last year – five more than in 2010, indicating the sector continued to be seen as a safe investment by shrewd investors.
Chiene + Tait is acting for a number of new estate owners and used SLE event to highlight the importance to rural businesses and estate owners of a number of key tax issues, including announcements from the autumn statement, changes to capital allowances and entrepreneur relief developments.
Helen added: “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.
“The current use of land can determine the long term capital tax treatment. If land is used for trading or agricultural purposes, 100% 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.
“Renewable energy in particular has proved to be a welcome income stream however; care is required to ensure that such income streams do not result in losing capital tax favored status. “
Chiene + Tait also used the SLE event to deliver advice to employers on salary sacrifice and pension changes.
Edinburgh-based Chiene + Tait has more than 125 years experience of providing tax planning and accountancy services for clients in Scotland.