Over the years, the team at Ellacotts has helped clients through various significant infrastructure projects – the M40, A43 improvements, numerous smaller bypasses, rail improvement and flood alleviation projects.
The scale and number of the projects we are now dealing with is unprecedented. Many infrastructure projects bring with them the potential for new housing, railway stations, new hospitals, and new villages, towns or cities.
Whether or not the project is of national significance makes little difference to affected landowners: the impact on them, their family, their farming business, and their quality of life, is what matters.
Some projects are of such scale that numbers of our clients are affected, notably:
- Rail Central, the proposed new strategic rail freight interchange and logistics and distribution hub in Northamptonshire, sited on the West Coast mainline which is south-west of Northampton, between Blisworth and Milton Malsor. This also comes with associated road links and highway improvements.
- The Cambridge-Milton Keynes-Oxford (CaMkOx) Arc, which includes a new East-West rail line connecting Oxford and Cambridge, accelerates plans for the Oxford to Cambridge Expressway Road; and aims to deliver one million new homes along the corridor by 2050.
- HS2, and associated infrastructure maintenance depots and railhead developments along the route, and notably around Birmingham Airport.
The Bicester area is set to be doubly impacted at the point where the new East-West rail line crosses HS2.
It is vital that you consider your tax position as a priority, to maximise the value of the price or compensation you retain, after tax.
In particular, consider:
- Who owns the property beneficially, rather than legally
- Current values for each property element and the Capital Gains Tax base cost for each owner
- Do you currently meet the conditions to claim Entrepreneurs’ Relief, or could you?
- The use made of each part of the property, for example:
- Your home attracts Capital Gains Tax Principal Private Residence Relief
- If used in a business, Rollover Relief may be available, although this is not a requirement if the property is subject to a Compulsory Purchase Order.
- Will all of the compensation relate to land or will some relate to the business? And whose business is that?
- Will you be reinvesting in replacement property? (Rollover Relief could be available).
- Should gifts be made of the affected property? But remember to consider the impact on potential compensation, as well as tax aspects.
Particularly if Rollover Relief is not being claimed, careful planning is needed to minimise Capital Gains Tax. A claim for Entrepreneurs’ Relief can reduce Capital Gains Tax to 10%, rather than the standard 20%. This may require the business to cease, or property ownership to change. Careful planning is therefore essential at an early stage.
If Rollover Relief is being claimed, the new asset must be acquired, or an unconditional contract for the acquisition must be entered into in the period:
- beginning 12 months before or
- ending three years after the date of disposal of the old asset
These limits may be extended at HM Revenue & Customs’ (HMRC) discretion. For landowners affected by Compulsory Purchase, HMRC can, at their discretion, extend the time limit to three years before disposal and six years after compensation is finally agreed.
Good tax advice at an early stage is essential to help direct your plans. If you are affected by any projects, we would be pleased to talk through how we can help you, and your farm business, and to work with your land agent and solicitor to achieve the best outcome for you.
Please contact Helen King for more information and advice on this matter.