Lay My Hat

After looking for a year we have finally found a property with lovely stone outbuildings. Our plan has been to convert them to high quality holiday cottages, live in the main house and carry on farming. The farm is ten miles from York and we will be mortgage free. With the high cost of converting the buildings we are worried that we have 'missed the boat' and the market is facing oversupply. Any thoughts?

If you're carrying on farming, you have to be careful about VAT registration. You'll presumably be VAT registered for your farming business and if the buildings are part of the farm, then you have to charge VAT on your holiday lets. You cannot compete against those who don't have to charge VAT.

Thank you for your reply. My understanding is that the cottages would operate as a separate business and stay under the vat threshold.

Cattle farmer wrote:Thank you for your reply. My understanding is that the cottages would operate as a separate business and stay under the vat threshold.

Have you taken professional advice on this?

HMRC tend to combine businesses for VAT purposes. They may not allow it.

Cattle farmer wrote:Thank you for your reply. My understanding is that the cottages would operate as a separate business and stay under the vat threshold.

Have you looked at https://www.accountingweb.co.uk/tax/bus ... e-business?

The previous owner of our place had a VAT registered farm and non-VAT holiday let, but different members of the family were registered as directors of the 2 companies (and in reality his daughter and son in law did most of the work with the sheep).

Will look into the vat question. Any thoughts on the wisdom of converting buildings from scratch?

Cattle farmer wrote:Will look into the vat question. Any thoughts on the wisdom of converting buildings from scratch?

Here is something out of 'Country Life' from June 2014:-

The changes mean that if a building had an agricultural use and was constructed before March 20, 2013, and formed part of an agricultural unit at that date, planning permission is not required to convert it into up to three residences as long as the cumulative floor space isn’t more than 450sq m (4,840sq ft).
Read more at http://www.countrylife.co.uk/property/c ... P0q5s5T.99

I find it hard to believe!

I've never done a conversion, just renovation for residential letting, but even then there were some major expenses that we hadn't anticipated. I imagine that's even more likely with a full conversion. So it depends on how much you have in reserve, and also how much you think the finished let will add to the value of your property. I think the detached bungalow (former granny annexe) that we let out added about £100k to the 2017 price of the house, but cost more than that to build in 2005. We also have a cob/stone barn that has planning permission to convert to 2 further units, but there's no way my husband would give up what is now his wonderful workshop

Here is something out of 'Country Life' from June 2014:-

The changes mean that if a building had an agricultural use and was constructed before March 20, 2013, and formed part of an agricultural unit at that date, planning permission is not required to convert it into up to three residences as long as the cumulative floor space isn’t more than 450sq m (4,840sq ft).
Read more at http://www.countrylife.co.uk/property/c ... P0q5s5T.99

I find it hard to believe!

But

Q. Do I need to notify the Council before I can enact the changes?
A. Yes. There is a prior notification procedure where you must apply to the Council to give them the
opportunity to approve of refuse matters relating to
– Transport and highways impacts – Noise impacts
– Contamination risks at the site – Flooding risks on the site
– Whether the location or siting of the building is practical and desirable for a dwelling
– Design and external appearance

Apparently only 1 in 3 applications has been successful. And as it's 'permitted development', presumably you need to have more than 5 hectares?

Cattle farmer - the key piece of advice I would give is to make sure that you have planning permission up front. If this is not forthcoming then everything else falls. All councils act differently in practice - at the moment we are experiencing difficulty in getting permission to build on a very dilapidated previous building.

The only way you will know is to apply to your council. If you experience difficulties you could consider using a planning consultant. These often are local architects who understand how their local council planning system operates.

Cattle farmer - we are farming in Yorkshire & also have a Holiday let on the Farm. Our accountant told us that the only way to keep it away from the agricultural business to avoid vat on the holiday let earnings was to split the property title. Planning permission was granted for development of the building but it had to remain part of the farm and cannot be sold off separately. We are in the National Park but I would check that you would not have this restriction.

Have you considered a camping barn rather than cottages? Previous owner had done that in ours. Minimal conversion costs, just weatherproofing, a shower room (could be composting toilet), kitchen sink and a bit of worktop, concrete floor with some covering, and some form of heating (woodburning stove in ours). Obviously income is much lower, but any work you do will help towards eventual cottages if you go down that route later.

Another thing to look at is how it will affect your farm payments, assuming you claim. I have to sign something every year about income from property - from memory it's that all property owned by the farming business which is providing income stands on the farm's land, not elsewhere.

Check it with your advisors if applicable, but my reading of it was that property income from properties not on the farm was fine as long as the property wasn't owned by the same business that owned the farm.