Land Use & Diversification Flashcards
Why is diversification on a rural Estate important?
- to help mitigate risk and volatility
- introduce new income streams
- maximise potential of all assets
What is diversification?
When one branches out/away from traditional practise by adding a new money-making practise.
What might you carry out in the early stages of diversification?
A feasibility study.
What is a feasibility study?
An assessment of the practicality, performance and profitability of a proposed diversification.
You might look at:
- market demand
- costs and funding
- income, profitability and return on investment (ROI)
- profit and loss
What would you include in a P&L?
- Income
- Cost of Sales
- Expenditure
- Depreciation
What is a Return on Investment (ROI)?
A performance calculation that measures how profitable an investment is by comparing the gain or loss it generates.
You refer to rationale and consideration that is taken into account when assessing diversification projects. Please expand.
- sit within Estate values, vision and objectives?
- forecast income versus current income (land use change)
- tax implications
- demand
- ROI
- COMMUNITY BENEFIT
What CPD events have you attended that explore diversification?
- SLE rural conference
- Savills rural community engagement day
You mention change in land use, and the TAX implications this can have. Please expand.
Inheritance Tax
Agricultural Property Relief (APR): if the asset is not seen to be occupied and used for agricultural purpose, it may not qualify for APR.
Business Property Relief (BPR): this could have a positive benefit. If an asset is seen to be ‘trading’ it could be eligible for BPR.
What is a ‘trading’ asset?
The owner must be seen to be providing a service and incurring an element of risk.
An investment asset is a much less ‘risky’ transaction. Such as a residential property.
There is an ‘all or nothing test’ when HMRC are assessing BPR eligibility.
Can you give an example of diversification projects the Estate have looked at?
- renewables
- storage containers
- holiday lets
- cabins/shepherds huts
What is included within your shoot contracts?
- date
- location
- bag
- rent
- payment terms
- cancelation policy
- insurance
- signature space
Ok, interesting, what is your cancelation policy?
If, due to factors out with the proprietors control the day is cancelled, no refund would be given. It is on the shoot tenant to take out appropriate insurance.
What insurance is required under your shoot contracts?
Each member of the shooting party must possess a current insurance policy for accidents, injury or damage to himself or to third parties to a minimum cover of £10,000,000 (ten million pound sterling).
What do you do if a member of the team does not have insurance?
I would advise them where they could access such insurance, such as the British Association for Scooting and Conservation (BASC).
Failure to comply would result in the individual being able to shoot.
I have not been involved in this situation, but have been versed in the correct protocol.
What do you ask of your shoot guests prior to the shoot day?
- copy of valid shotgun cert.
- copy of insurance
- dietary requirements
What are the payment terms for your shoot days?
Generally, a deposit is paid one month post signing of the contract.
Balance two months prior to the tenant’s day.
What is the standard rent of a 3MW wind turbine?
Roughly £40,000 turbine/anum
What are the planning stages for a new windfarm?
- screening
- feasibility
- environmental assessment
- development
- contract execution
- project delivery
- project operation
Did you encounter any objections throughout the Dunside project? If so how did you handle these?
We received a concern from Historic Environment Scotland.
- Concerns over the visual impact of a site of archaeological interest (the Mutiny Stones)
- We spoke with HES and addressed their concerns. We subsequently removed one turbine and moved a second.
What is an Environmental Impact Assessment (EIA)?
An EIA is a comprehensive study that evaluates the potential environmental effects of a project and identifies ways to mitigate or minimalize any negative impact.
What is a ‘trading’ asset?
The owner must be seen to be providing a service and incurring an element of risk.
Is a holiday let a ‘trading’ asset?
Yes, Furnished Holiday Lets’ (FHL) are seen as trading assets in the eyes of HMRC.
What is rollover relief?
Rollover relief allows a trader to defer the payment of CGT where all or part of the proceeds of a business asset are injected/reinvested into a new trading asset.
