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Converting farm buildings just got easier

In East Sussex, a property owner sought to conceal the fact that he had moved into a barn from planning officers by blacking out the windows he had installed, placing animal feed and bedding in his bedroom and rabbit hutches in the living room.

Similarly, in Dorset, a man who had converted a barn without permission hid the heating boiler in a barn-owl box and the house’s front door behind a traditional barn door. Now, such ruses should no longer be necessary after the Government relaxed planning laws on April 6.

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).

However, the external dimensions of the building can’t be extended- ‘even to add a porch,’ warns Charles Birtles of Charles Birtles Property Search-and the building can’t be totally knocked down and rebuilt, although partial demolition is allowed. During consultations prior to drafting the new law, Paul Miner, Senior Planning Campaigner for CPRE, had warned: ‘Old farm buildings could be converted in completely inappropriate locations and the changes could be exploited by unscrupulous landowners to erect so-called “farm buildings”.’

The CPRE and national parks chiefs campaigned to get barns in national parks, AONBs, SSSIs exempted. Although planning permission isn’t required for such conversion, prior approval from the council is. The council will consider the impact of the development on transport, highways and noise, as well as the contamination and flooding risks. It also has to decide whether the location makes it otherwise impractical or undesirable for the building to change from agricultural to residential use.

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The unlisted buildings on the Biddenfield estate in Hampshire are ripe for conversion under the new planning law. £4 million through Savills (01962 841842)

‘This final issue is likely to result in disagreements between developers and councils,’ says Joe Ridgeon, planning consultant for George F. White. ‘The others are technical considerations, but the desirability of a location is much more subjective.’

To ease fears that these changes could be a back-door way to new housing developments without the need for planning permission, a building erected after March 20, 2013, must have been standing for at least 10 years before it can be converted. Whether this will prevent exploitation by the erection of unwanted ‘agricultural buildings’ always intended for conversion later is debatable. Perhaps it will only force developers into taking a medium-term view?

‘Allowing farmers to convert redundant buildings is sensible,’ says Mr Birtles. ‘It gives a new lease of life to buildings that would otherwise fall into disrepair and potentially gives farmers a new income stream. However, landowners need to consider whether they’re comfortable with being a landlord. Not only with the usual burdens of it, such as maintaining boilers and so on, but with the fact that most of these buildings will have to have suitable access over private land owned by the landlord.’

Landowners need not rent dwellings out-they could simply sell the building, converted or unconverted. What they opt to do may be determined by the tax consequences. Selling an unconverted building can bring a liability to Capital Gains Tax (CGT) at 28% of the net gain subject to normal annual CGT allowance and any losses generated elsewhere or brought forward, even if the property was used in the business- but can a redundant building be said to be used in the business?

‘It’s only an asset disposal, not the disposal of a business interest, so CGT entrepreneurs’ relief isn’t applicable,’ explains Mike Harrison of Saffery Champness. The profit on the sale of a converted building will be taxed as income (at rates up to 45%) rather than as CGT.

For those converting a building for their own use, ‘the most important issue is probably whether the VAT costs will be recoverable,’ says Mr Harrison.

‘The VAT charged on such a conversion will, in some circumstances, only be 5% not 20%, but this needs determining when the build contract is placed rather than when the bills are paid.’

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* To qualify, buildings must have been built before March 20, 2013

* Listed buildings don’t qualify

* External dimensions can’t be extended

* Selling will incur tax liability