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Patrick Kelly APC > Land Use & Diversification > Flashcards

Land Use & Diversification Flashcards

1
Q

Why is diversification on a rural Estate important?

A
  • to help mitigate risk and volatility
  • introduce new income streams
  • maximise potential of all assets
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2
Q

What is diversification?

A

When one branches out/away from traditional practise by adding a new money-making practise.

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3
Q

What might you carry out in the early stages of diversification?

A

A feasibility study.

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4
Q

What is a feasibility study?

A

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
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5
Q

What would you include in a P&L?

A
  • Income
  • Cost of Sales
  • Expenditure
  • Depreciation
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6
Q

What is a Return on Investment (ROI)?

A

A performance calculation that measures how profitable an investment is by comparing the gain or loss it generates.

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7
Q

You refer to rationale and consideration that is taken into account when assessing diversification projects. Please expand.

A
  • sit within Estate values, vision and objectives?
  • forecast income versus current income (land use change)
  • tax implications
  • demand
  • ROI
  • COMMUNITY BENEFIT
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8
Q

What CPD events have you attended that explore diversification?

A
  • SLE rural conference
  • Savills rural community engagement day
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9
Q

You mention change in land use, and the TAX implications this can have. Please expand.

A

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.

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10
Q

What is a ‘trading’ asset?

A

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.

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11
Q

Can you give an example of diversification projects the Estate have looked at?

A
  • renewables
  • storage containers
  • holiday lets
  • cabins/shepherds huts
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12
Q

What is included within your shoot contracts?

A
  • date
  • location
  • bag
  • rent
  • payment terms
  • cancelation policy
  • insurance
  • signature space
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13
Q

Ok, interesting, what is your cancelation policy?

A

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.

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14
Q

What insurance is required under your shoot contracts?

A

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).

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15
Q

What do you do if a member of the team does not have insurance?

A

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.

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16
Q

What do you ask of your shoot guests prior to the shoot day?

A
  • copy of valid shotgun cert.
  • copy of insurance
  • dietary requirements
17
Q

What are the payment terms for your shoot days?

A

Generally, a deposit is paid one month post signing of the contract.

Balance two months prior to the tenant’s day.

18
Q

What is the standard rent of a 3MW wind turbine?

A

Roughly £40,000 turbine/anum

19
Q

What are the planning stages for a new windfarm?

A
  1. screening
  2. feasibility
  3. environmental assessment
  4. development
  5. contract execution
  6. project delivery
  7. project operation
20
Q

Did you encounter any objections throughout the Dunside project? If so how did you handle these?

A

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.
21
Q

What is an Environmental Impact Assessment (EIA)?

A

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.

22
Q

What is a ‘trading’ asset?

A

The owner must be seen to be providing a service and incurring an element of risk.

23
Q

Is a holiday let a ‘trading’ asset?

A

Yes, Furnished Holiday Lets’ (FHL) are seen as trading assets in the eyes of HMRC.

24
Q

What is rollover relief?

A

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.

25
Q

What did you include in your review at Farm Row?

A
  • Spoke with C&C
  • Projected occupancy
  • High and low period income
  • Expenditure
  • Internal management (time etc.)
  • Business rates
26
Q

How did you project the income of the proposed STL?

A
  • Using local comparative data of similar properties
  • I spoke with a local holiday lettings agent to discuss likely occupation rates
  • Generated a P&L
27
Q

You refer to a P&L what is one of these?

A

A profit and loss forecast estimates the firm’s revenues and expenses, and how much profit it has earned over a certain period of time

28
Q

What was included within your P&L?

A
  • Rental Income
  • Cost of Sales (commission, laundry & welcome packs)
  • Overheads (rates, repairs etc.)
29
Q

What did you advise Roxburghe Estate (Farm Row)?

A

I advised a long term let was a safer investment for the following reasons:

  • Liable for less overheads.
  • Less risk as occupation levels differed massively.
  • The sensitivity of the location.
  • The return would be higher in this instance if the property were let on a PRT.
  • When letting on a PRT we would have to be extra cautious with our tenant selection process.
30
Q

What was included within your budget at Calroust?

A

Income
- shoot lets rent
- game sold
- grants/subsidies

Cost of Sales
- poults
- feed
- vets
- beaters wage

Expenditure
- rent
- staff costs
- council tax
- insurance
- vermin control (ammo etc.)
- property maintenance

Depreciation

31
Q

How did you calculate depreciation?

A

Depreciation was calculated on any ‘capital assets’ – thus being assets, when new, worth over £5,000.

Cost of new – less forecast sale value (the depreciation amount would be divided across the lifetime of the asset).

Inflation may also be taken into account, I would speak with our accounts team, as they would implement and agree on the inflation amount.

32
Q
A

Patrick Kelly APC (10 decks)

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