CENTRAL ASSOCIATION OF AGRICULTURAL VALUERS

NATIONAL WRITTEN EXAMINATION

PAPER I

13 NOVEMBER 2014

9.00am – 10.30am

Time Allowed – 1½ Hours

Instructions to Candidates:

1.	Complete the Green Examination Information Sheet by stating your examination candidate number (not your name) together with the area in which you are practising and the local Association of which you are a member.  Attach the green sheet to the top of your answer pad and ring the numbers of the two questions that you have answered.
2.	Write your candidate number, the number of the question and the page number in the top right hand corner of each page.

3.	Write on one side of the paper only, leaving the margin on the left- hand side.

4.	Start each answer on a separate sheet and place your answers in numerical order.

5.	Time has been allowed for you to read through the Question Paper and plan your answers.

6.	You should attempt to answer two out of the three questions, ringing their numbers on the green sheet.  Where relevant state whether you are answering for England, Wales or Scotland.

7.	All questions carry equal marks: 20 each.

8.	Questions are framed so as to minimise the need to make assumptions but state clearly any that you do make and the reasons for them.

9.	Where appropriate, you will be expected to state the relevant Act, Statutory Instrument or case upon which you have based your answers.

10.	You may use imperial or metric measurements in your answers.  Please indicate which units you are using.

11.	The presentation and clarity of your answers is important.

Question 1

Answer only five of the eight parts of this question

A)	Explain the procedure that an owner/occupier should follow before ploughing up a field which has been in continuous permanent pasture, uncultivated and semi-natural, for 20 years.

B)	What is the difference between a tenant’s fixture and a tenant’s improvement under the Agricultural Holdings Act 1986 (in Scotland, the Agricultural Holdings (Scotland) Act 1991)?  

C)	What principles were established in the Inheritance Tax case, HMRC v Hanson?

D)	What are Certificates of Lawful Use or Development?

E)	Explain the differences between formal and informal tender.

F)	What are “Special Assumptions” and how do you deal with them in a Red Book Valuation?

G)	Explain Permitted Development Rights for the development of buildings and operations for agricultural use?

H)	What is Non-Domestic RHI and how does it work?

Question 2

You have been asked to advise a 55 year old widowed client with two grown up children.  He owns a farm that comprises 500 acres of arable land and 200 acres of woodland, a very substantial 10 bedroomed house, a set of modernised farm buildings and four cottages.  One of these cottages is occupied by a full time farmworker, one by a retired farm worker and the others are let on ASTs (SATs in Scotland) to non-agricultural tenants.  He also has an Agricultural Holdings Act tenancy of a further 500 acres of bare land.  He has no other land or property.

He has heard on the grapevine that he doesn’t have to worry about planning for Inheritance Tax because it will all be free of tax as all his wealth is in agricultural property. 

•	Your client is a full-time in hand farmer with the farm office in the main house 
•	He has owned the farm for ten years
•	Valuations have been given for 
o	the farmland and farm buildings £3.5 million
o	the woods at £400,000
o	the main house at £1.5 million
o	the cottages at £200,000 each
•	The value of his other heritable assets amounts to £250,000 of which £150,000 is in his farming business and £100,000 is in personal possessions, money, investments and chattels

Prepare notes to advise him on his likely exposure to Inheritance Tax, identifying in particular the following:

1.	Outline the basic rules of Inheritance Tax and the principal reliefs from IHT that might be available to him. 						(7 marks)

2.	For Agricultural Property Relief, detail the more relevant court decisions, explaining how each of these might affect the amount of relief available. 	
(6 marks) 

3.	Calculate the IHT liability in his current situation if he were to die suddenly (based on the facts below). 						(5 marks)

4.	Advise on two measures he might take to reduce this tax liability. 	(2 marks)

Question 3

You are advising a farmer, who already farms 1000 acres locally, who wants to take part in a nationally advertised market rental tender to try to secure a 300 acre arable farm, combineable crops only, on a 5 year Farm Business Tenancy (SLDT in Scotland).  There is a 1,000T grain store and a general purpose/machinery shed on the farm and a small detached farm bungalow (vacant).

Write a letter of advice to your client setting out:

1.	A brief indicative budget demonstrating the farm’s earning potential that you believe appropriate to assist your client prior to the submission of a tender.										(8 marks)

2.	What he should cover in his tender submission and the main areas on which he should concentrate to make the tender stand out in the process with what supporting documentation.																	(8 marks)

3.	The likely outside influences which should be recognised as factors to take account of when tendering.																(4 marks)