Rural Estates Newsletter Spring 2021 - Flipbook - Page 17
Where any occupation is not documented (eg a family member or old retainer is living in
a cottage on the estate with no tenancy agreement in place), the bank will require each
adult to sign a form consenting to the grant of the charge. Often the bank will require
that independent advice is given to each occupier. Again, this can cause delays and add
to the cost.
The ideal land to charge will be land where the occupation position is clear, can be easily
reported to the bank and is properly documented (or where only a limited number of
individuals would need to provide consent).
Tax
“
There are also likely to be tax issues to consider, in particular relating to inheritance tax
(IHT), when selecting the land to charge to the bank. Once upon a time (before 2013) it
was possible to use borrowing to help with IHT efficiency – borrowing against residential
property to invest in assets that benefited significantly from business or agricultural
property relief. This is no longer possible as the IHT liability will attach to the property
which would, but for such investment, have benefited from the tax relief. It is important
to consider the purpose of the borrowing, and hence the likely impact on future IHT
liabilities, when taking out a loan. This is a detailed and complex area and you should take
specialist advice at an early stage.
It is important to consider the purpose of the
borrowing, and hence the likely impact on future IHT
liabilities, when taking out a loan. This is a detailed
and complex area and you should take specialist
advice at an early stage.
Change of ownership
Finally, an issue which won’t delay drawdown but could make matters more complicated
in the long run. If there is any discussion of an imminent change in ownership, especially
if this involves a change of trustees, the necessary steps should be taken before the land
is charged. Once the charge has been granted and the loan drawn down, you will need
the bank to consent to any change in the title structure. The bank might also require the
new owners to grant a new charge to the bank and you will have to start the process (and
pay all the valuation and legal fees) all over again!
Rural Estates Newsletter
Spring 2021
17
