Land Use & Diversification

Question 1

Why is diversification important to the sustainability of your client?

Answer 1

• Diversification provides another income stream - offers sustainability
• Often maximises potential for existing assets

Question 2

What are use classes?

Answer 2

Use classes are what a building is permitted to be used for

Question 3

What are the individual use classes?

Answer 3

The use classes are set by the Town and Country (use classes) (amendment) regulations 2020, which updated the 1987 order of the same name
they are as follows:
Class B - Industrial
Class C - Residential
Class E - Commercial, Business & Service
Class F - Local Learning and non-residential institutions
Sui Generis - in a class of its own - petrol stations etc.

Question 4

Why have the recent changes helped Diversification projects?

Answer 4

This is largely down to the introduction of use class E, which offers greater flexibility for business and commercial use

Question 5

Why were the regulations introduced?

Answer 5

Primarily to allow for greater flexibility and change of use for high street shops. And, to protect community infrastructure, by introducing the new F class

Question 6

Is planning permission not required to change use in the same use class?

Answer 6

If it is simply change of use then planning is not normally required, if there are any building works associated with the proposal it may require planning or prior approval

Question 7

What are the tax implications when diversifying?

Answer 7

Various tax regimes will affect a proposed diversification project, broadly:

-VAT – Value added tax will be due on any works and professional advice sort
-Council Tax – If there is a proposed change of use to residential a property will be liable for council tax and rating
-Non-Domestic Rates – If there is a proposed change of use to commercial a property will be liable for rates
-Inheritance Tax – If the current use of the land or property is agricultural, a change of use outside of this will affect any potential inheritance tax due. This is because APR will not be available on the full value of the asset.
-Capital Gains Tax – Any diversification is likely to increase the market value of an asset. Therefore, should a sale be considered then this could incur a higher capital gains tax liability.

Question 8

What is VAT?

Answer 8

A tax that is charged on goods and services, payable by the consumer at the current rate of 20%

Question 9

What is Capital Gains Tax?

Answer 9

Capital Gains Tax is a tax on profits when you dispose of an asset that has increased in value
It is taxed on the increase in value between the sale price and the acquisition cost, or 31st March 1982 whichever is the sooner

Question 10

What are the rates for CGT?

Answer 10

10% or 20% dependent on whether you are a low or high rate tax payer
Additional 8% surcharge on property

Question 11

What are the reliefs from CGT?

Answer 11

• Tax free allowance - £12,600 per annum
• Gifts to your spouse or civil partner
• Business Asset Rollover Relief - delayed CGT as long as you buy qualifying assets within 3 years
• Primary residence relief -

Question 12

What is Inheritance Tax?

Answer 12

Tax on the estate of someone who’s died

Question 13

What is the rate of Inheritance Tax?

Answer 13

40%

Question 14

What are the reliefs available for inheritance tax?

Answer 14

• Nil Band Rate - anything above £325,000
• Potentially Exempt Transfers - if you gift an asset and then survive 7 years
• Business Property Relief
• Agricultural Property Relief

Question 15

When do you need to pay CGT?

Answer 15

• on property within 60 days of sale
• on other gains (such as stocks/shares) it is 31st January

Question 16

When do you need to pay IHT bills?

Answer 16

Within 6 months of the date of death

Question 17

What are rates?

Answer 17

They are an annual tax paid on non domestic property

Question 18

How are rates calculated?

Answer 18

Each property is assessed for its rateable value, your business rates liability is calculated by multiplying this by the multiplier (around 50 pence)

Question 19

What reliefs are available for business rates?

Answer 19

Small Business Rate Relief - no tax on properties with a rateable value below £12,000, tapered relief between £12,000 - £15,000
Rural Rate Relief - In a rural area, only village shop and rateable value of £8,500
Charitable Rate Relief - 80% relief for properties used for charitable purposes

Question 20

How is council tax calculated?

Answer 20

Council tax is based on the value as at 1st April 1991, dependent on this value will depend on the properties Band

Question 21

What if your property is new how would the council tax band be assessed?

Answer 21

The VOA will assess the properties banding

Question 22

How do you challenge a properties council tax band?

Answer 22

• Need to provide information to the VOA
• VOA will only consider, if the property has changed, part changed, the local areas has changed, or you have only been paying CT on the property for 6 months
• Challenge - you need to provide information of similar properties in the local area with a lower CT band, or values at 1st April 1991
• takes 2 months to review, you can appeal to valuation tribunal

Question 23

What are the reduced rates for VAT when diversifying?

Answer 23

• Conversion of Agricultural to Residential can be applicable for 5% VAT
• New builds - 0% VAT
• Empty for 2 years - reduced rate of 5%

Question 24

What are conversion costs for residential buildings?

Answer 24

dependent on spec, but could be in the region of £150 / square foot

Question 25

What are conversion costs for commercial buildings?

Answer 25

dependent on spec, but could be in the region of £75 / square foot

Question 26

What are rents in your area?

Answer 26

£12 / square foot for commerical offices
£20-25 / square foot for residential

Question 27

How would you connect utilities to a property?

Answer 27

Contact UKPN, National Grid to make the connection to the property

Question 28

Please can you talk me through the conversion of the old Mill Building?

Answer 28

• These were outbuildings adjacent to an old mill.
• When I joined the firm the planning permission had been granted, and I was involved with liaising with the client and planning consultant who was discharging the conditions
• The conditions we had to discharge were:
• Details of the windows, some of which were to be repaired and some of which needed replacement
• Details and further drawings of certain features were required, under stair cupboard
• Archaeological report needed to be submitted and approved
• Once these were discharged I instructed the contractor to implement the planning permission. Which was to undertake the drainage connections to the property.
• I then sought a certificate of lawfulness from the council that the works had been undertaken.

Question 29

What was included within the feasibility study for solar panels on the agricultural building?

Answer 29

Economic -
- I assessed the meter readings for the farm over the previous years to look at payback, roughly 7 year payback
- Costs associated - cost of the solar, cost of the planning, Fees
Planning considerations - the building wasn’t listed or in a conservation area, and generally speaking there were little planning constriants
- Ongoing maintenance -

Question 30

Can you talk me through the shared workspace you explored, what did you do?

Answer 30

• This arose towards the end of a commercial office building, the tenants didn’t want to renew
• We knew there was little call for offices at the time because of other offices marketed locally particularly for the size of this particular office
• I had heard of a local company who were looking to expand, and we discussed with them of potentially taking over the space
• I reviewed there accounts, and entered into discussions on how to proceed
• At this time it was at the tail end of the initial wave of the pandemic and property markets were reopening up and also flourishing
• I then sought conversion costs for splitting the barn into two: dividing wall, submeters, and liaised with the client

Question 31

What did you investigate when on the site in North Hertfordshire?

Answer 31

• Condition of properties
• Size - measured using a disto
• Current use of the properties
• Location - how near to local amenities

Question 32

What did you include in your report for the North Hertfordshire farm?

Answer 32

• Description of the brief -
• Description of the Properties & Buildings
• Identification of the opportunities - Storage, Events
• Planning considerations
• Cost of conversion & return following re-letting
• Marketing Strategy
• Management and documentation of the agreements

Question 33

What was the planning considerations for conversion to storage purposes?

Answer 33

The buildings were currently agricultural so they could be converted under Class R change of use, which would allow storage purpsoes

Question 34

What are the requirements of class R conversion?

Answer 34

• needs to have been used for agriculture for 10 years, or as at 3rd July 2012
• needs to be 500 m2 or less
• cannot be listed building
• Also if the building is less than 150m2 there is a simpler planning process, doesn’t need transport assessment, also no requirement before 8 weeks determination has finished

Question 35

What other options could you have considered?

Answer 35

Class Q - although this would require more capital, and would mean a dwelling right next to the clients
Class R - for more substantial commercial use, not really a market as very rural
Events - there was a large traditional barn that could have been used for event space, such as weddings, large interference with owners property, potentially very hands on.

Question 36

What was included within the report for conversion of land to solar?

Answer 36

• Details of our inspection - date, limits
• Description of the land, rights of way, boundaries, observations
• Tenancies as perceived and advice on these
• Recommendations - Public Access, inspections,

Question 37

What would be the requirements under Class Q?

Answer 37

• Used for Agriculture in March 2013, or for a period of 10 years
• Agricultural holding hasn’t already used Class A pd rights
• You can have 5 properties, 4 up to 100m2, 1 up to 465m2

Question 38

What was your advice in relation to the potential solar development?

Answer 38

At this early stage I advised on the suitability. This looked at access issues, tenancies, and also potential threats. Such as fly grazing

Question 39

How can someone claim possession of that land?

Answer 39

Claim possession if they have 10 years uninterrupted use or 12 years if the land is registered

Question 40

How would you regain possession of the land?

Answer 40

Half of the land was on a licence, This was for landing lights as the site was close to an airport. The licence was terminable in 2 years, but i queries whether the solar use would impact on these.
Half of the land was on an FBT. S.6 notice under the Act giving between 12 & 34 months notice

Question 41

Why was the agricultural building not of the size appropriate?

Answer 41

It was too small, and coming to the end of its useful life with repairs required due to leaks, it was also not ideally located as it was on the edge of the holding

Question 42

What other commercial units did you propose?

Answer 42

I proposed other office space, because:
- It would bring in diversified income, as the estates portfolio didn’t include much commercial property, therefore spreading risk
- It would increase income, as there wasn’t any income from these buildings at present
- It would also solve an issue because these buildings were getting to the end of their useful life