Land use and diversification - L1

Question 1

Explain your knowledge of how a variety of land uses, policies and options for diversification have an impact on real estate and business.

Answer 1

Competing land use issues in the UK between farming, housing, renewable energy, expanding towns and cities which makes knowing what to do with land difficult.

Policies that govern this include the National Planning Policy Framework (NPPF) which extends down to Local Plans.

Impacts - changes in land values and either increase or decrease in rental figures, but growth in the sector and as areas diversify this encourages further diversification

Question 2

What are the principles, rationale, and criteria for diversification projects?

Answer 2

Principles include maximizing land value, reducing risk, and responding to market demands. Criteria involve feasibility, financial viability, planning permission, and alignment with long-term business goals.

Question 3

Explain your understanding of relevant planning issues.

Answer 3

Currently in planning there are big issues around housing supply and the affordability and actually then getting houses built. Interesting podcast by the CAAV on the changes the Labour government want to make that tells local councils how many houses they need to provide. This then links with renewable energy and changes there to the levels where planning applications need approval to reduce the numbers going through NSIPs process.

Green belt protection
Planning reform
Sustainable development

Broader challenges of balancing development needs with environmental protection, community involvement, and infrastructure demands.

Question 4

What agencies are likely to be involved when diversifying into new enterprises?

Answer 4

Local planning authority for planning permission
Environment Agency should it need permits
Nature England is the enterprise is within a protected area eg. SSSI

Question 5

Explain the relationship of taxation and diversification.

Answer 5

Diversification can affect tax liabilities, including income tax, capital gains tax, and VAT. Some diversified activities may qualify for tax relief or exemptions, but others could lead to higher tax burdens.

Question 6

Are there any grants or funding available?

Answer 6

Yes, grants and funding for diversification are available from various sources, including DEFRA, the Rural Payments Agency, and local enterprise partnerships. These can support agricultural diversification, rural business development, and environmental projects.

Examples include - Farming Investment Fund (FIF)

Question 7

Explain your understanding of construction issues and costs, resultant income and yield, and subsequent management issues relating to diversification.

Answer 7

Construction costs depend on the project’s scale and complexity, impacting profitability and yield. Ongoing management includes maintaining the new use, adhering to regulations, and ensuring sustainable income streams

Question 8

Give an example of potential diversification projects.

Answer 8

Examples include converting agricultural buildings into holiday lets, setting up a farm shop, or developing renewable energy projects like solar farms.

Question 9

What PDRs relate to the conversion of agricultural buildings?

Answer 9

Class R is the PD right which allows landowners to convert buildings from agricultural to commercial use but also into sport and recreational use too.

Question 10

How does the prior notification process work?

Answer 10

For certain PDRs, the prior notification process requires notifying the local planning authority, which can approve or request further details within a set period (usually 28 days) to ensure compliance with regulations.

Question 11

How can the planning process be followed for non-PDR projects?

Answer 11

For non-PDR projects, a full planning application must be submitted, including detailed plans, environmental assessments, and consultations with relevant stakeholders. Approval is required before proceeding.

Question 12

What potential timescales need to be considered?

Answer 12

Timescales for planning approval can range from a few months to over a year, depending on the complexity of the project, public consultations, and any appeals or revisions needed.

Question 13

What planning risks do you need to consider?

Answer 13

Planning risks include project refusal, costly delays, conditions that affect profitability, public opposition, and the possibility of legal challenges. Thorough planning and early consultation can mitigate these risks.

Question 14

How might ecology affect your advice?

Answer 14

Ecological assessments may be required for projects, which may bring up measures that need to be implemented or conditions adhered too. These will fall under environmental regulations and thus may impact on timings and costs of projects

Question 15

What legal issues might you need to consider around the proposed business structure?

Answer 15

Land use change and taxation
Contracts and liabilities of the business

Question 16

How would you advise on taxation in this respect?

Answer 16

I am not a tax expert, would advise client to seek this level of knowledge from someone who is an expert

Question 17

What forms of business structure are you aware of?

Answer 17

sole proprietorship, partnership, limited liability partnership (LLP), and limited company

Question 18

When might each be appropriate to use?

Answer 18

Sole Proprietorship: Simple, suitable for small-scale operations.
Partnership: Best for businesses with multiple owners sharing profits and responsibilities.
LLP: Offers limited liability while retaining partnership flexibility.
Limited Company: Ideal for larger ventures needing separate legal identity and limited liability

Question 19

What HR issues do you need to consider?

Answer 19

HR issues include compliance with employment laws, health and safety regulations, staff training, recruitment, employee contracts, and workplace policies.

Question 20

What is Business Property Relief and when might this be claimed?

Answer 20

BPR provides relief from inheritance tax on qualifying business assets. It can be claimed when passing on a business or shares in a business, but the business must be actively trading, not primarily investing.

Question 20

What is Agricultural Property Relief and how is it affected by diversification?

Answer 20

APR reduces the value of agricultural property for inheritance tax purposes. Diversification into non-agricultural activities may reduce eligibility for APR, potentially increasing the tax liability.

Question 21

Explain the importance of business planning to diversification aims.

Answer 21

Business planning is crucial for setting clear objectives, securing financing, managing risks, and ensuring the viability of diversification projects. It helps align resources and strategies with long-term goals.

Question 22

Why might diversification be considered?

Answer 22

reduce reliance on traditional farming/income streams
manage risk
respond to market demands
capitalise on new opportunities
enhance financial stability and growth

Question 23

What key trends in the industry are pushing forward diversification?

Answer 23

sustainability
renewable energy - solar farms etc
agritourism

Question 24

How can you add value to farm produce?

Answer 24

Adding value can involve processing raw products (e.g., making cheese from milk), branding and marketing, offering direct sales (e.g., farm shops), or creating unique, high-quality products.

Question 25

What farm energy opportunities might be available?

Answer 25

Opportunities include installing solar panels, wind turbines, biomass boilers, anaerobic digestion systems, and small-scale hydroelectric projects, which can generate energy for the farm and potentially for sale to the grid.

Question 26

Explain funding issues for diversification projects.

Answer 26

Securing financing and understanding the eligibility of grants available.
Managing cash flow during projects
ensuring return on investment

Question 27

Explain build cost sources you use when considering diversification projects.

Answer 27

Build costs would include
contractors
quantity/building surveyor
industry benchmarks
BCIS

Question 28

What is the Land Classification system?

Answer 28

Used to classify agricultural land, grade 1-5

Question 29

How can land grade vary with location?

Answer 29

Land grade can vary based on soil quality, drainage, climate, and topography. For example, low-lying areas with rich, well-drained soils may be classified as higher-grade land compared to hilly, rocky, or poorly-drained areas.

Question 30

How can redundant assets be repurposed for diversification projects?

Answer 30

Redundant assets like unused barns, stables, or farm buildings can be converted into new uses, such as residential units, office spaces, or retail outlets, adding value and creating new income streams.

Question 31

When might full planning consent be required for a diversification project?

Answer 31

Full planning consent is required when the proposed development involves significant changes to land or buildings, such as new constructions, substantial alterations, or changes that affect the use of land, especially if outside permitted development rights.