Tag Archives: enterprise
London Mayor secures planning change for the city
The Mayor of London has welcomed the UK Government's decision to reconsider planning proposals that would have potentially seen valuable office space in the city turned into homes. Boris Johnson has been actively lobbying the Government to amend proposals that he believes would have put the capital's key business districts at risk by allowing office space to be converted into homes without developers applying for planning permission for the change of use. Now the Minister for Housing and Planning, Brandon Lewis, has announced that he will amend the original proposals to ensure London is able to maintain a stock of quality office space in existing key areas, and allow the city to continue to attract jobs and growth. Last year the Mayor successfully negotiated for defined areas of central London to be exempt from a Government policy that allowed office space to be converted into homes without developers applying for change of use planning permission. These areas covered the Central Activities Zone which incorporates the City of London, the South Bank, parts of Kensington and Chelsea, the West End, the commercial area north of the Isle of Dogs and London's Enterprise Zones in the Royal Docks, plus the part of the City Fringe in east London which makes up the emerging Tech City opportunity area. However new proposals announced by the Government would have removed these exemptions which Johnson believes potentially threatened London's internationally important business locations. Lewis said that the Government will allow local authorities to bring forward special planning regulations known as Article 4 directions if they wish to continue determining planning applications for the change of use. This will ensure that London's commercial heartlands will be protected from planning changes. ‘I am delighted that Government has put policies in place that will lead to the protection of our thriving business districts. Removing the planning exemption in those areas would have put the future economic growth of this city at risk, but by agreeing to amend their proposals the Government are ensuring we will be able to maintain the full stock of quality office space required for our city to continue to prosper,’ said Johnson. The Mayor is firmly on track to deliver 100,000 affordable homes over his two terms, with more than 94,000 already built. In the last year there were almost 18,000 affordable completions, the most in any year in London since 1991 and the equivalent of a new affordable home built every 30 minutes. Since the Mayor took on 670 hectares of public land in 2012 some 99% has been released for development, in line with the Mayor's 100% target by the end of his term in 2016. Land already released by the Mayor includes east London's Royal Docks, the Beam Park site in Rainham, and the former Cane Hill hospital site in Croydon. The current exemptions will remain in place until May 2019, providing time for these local authorities to make an Article 4 application to remove the rights… Continue reading
Tony Wickenden: The Govt Moves To Target IHT Avoidance
12 September 2013 As I have said on more than one occasion in my writing about the general anti-abuse rule, the GAAR does not spell an end to targeted anti-avoidance rules. And this year’s Finance Act proves the point in relation to inheritance tax. In its 2013 Budget, the Government announced new provisions aimed at neutralising some of the inheritance tax advantages that can apply in connection with loans taken by the deceased which remain outstanding on their death. In this regard, the Government announced that these new provisions would prevent a loan being deducted from a person’s taxable estate before calculating inheritance tax when either: – The loan was used to acquire, maintain or enhance property qualifying for business property relief, agricultural property relief or woodlands relief – The loan was used to acquire, maintain or enhance excluded property, (ie usually, but not exclusively, non-UK situs property owned, usually, by non-domiciliaries that is, as a result, exempt from IHT) – The loan was not repaid on death and there was no good commercial reason for this. The original proposals applied to all deaths or other chargeable events arising after the Finance Bill 2013 receives royal assent – which it did on 17 July. Originally, there was no condition in relation to the date that the loan was taken. This meant that even loans taken out (without time limit) before the new restrictions were announced would be swept up by this provision. Okay, perhaps not retrospective strictly speaking but very much retroactive. In relation to BPR, APR and woodlands-relievable property, it is understood that this measure is primarily aimed at arrangements that (at least in the eyes of HMRC) aim to give an individual a “double deduction” by securing a loan on, say, residential property thus securing a deduction on death, yet enabling the borrower to invest in assets that are relieved from inherit-ance tax,for example, Aim shares which qualify for 100 per cent business property relief. The legislation does not discriminate in relation to intent and so could easily catch innocent commercial transactions. For example, individuals seeking to invest and work in a trading business or to purchase agricultural property to farm may take a loan on the security of their principal private residence or other personal assets. Such an arrangement would primarily (mostly exclusively) be commercially motivated and tax would not be any kind of determinant. As a result, a number of professional bodies raised concerns that the legislation as intended was unfair. Some pretty coherent arguments were advanced as to why the provisions, as drafted, were misconceived. Similarly well argued comments were made in relation to the non-relievable nature of loans taken to acquire, enhance or maintain excluded property. The Government has listened to these representations and decided that (in relation to the acquisition, enhancement or maintenance of property that qualifies for BPR, APR or woodlands relief) only loans entered after 5 April 2013 will be affected by these new provisions. So it has listened but only introduced a small relaxation in relation to the time the loan was taken. There has been no general relaxation by reference to intention which was what was hoped for. Would it have been that difficult, for example, to exclude from the non-deductibility rules any loans taken to invest in businesses or farms by individuals who work full-time in the enterprise that receives the benefit of the funds borrowed – subject to suitable safeguards? Apparently it is (too difficult) and so advisers to business owners and farmers must be aware of this when calculating the potential IHT liability of these individuals. One unintended consequence of these provisions is likely to be an increase in the IHT liability of some business owners and farmers. Not by reference to any direct reduction of BPR or APR or woodlands relief but the increase in the IHT value of non-relievable assets which would have otherwise been reduced by a deductible debt. Of course, this may also be the case for some non-UK domiciliaries. The former category, of course, represents, for most advisers, a greater and more accessible client segment. For those of the right age and in good health the role of life assurance in trust (usually on a last survivor basis) for married couples (given the spouse exemption and transferable nil rate band), as a means of providing for the liability without changing their life, should not be overlooked. Tony Wickenden is joint managing director of Technical Connection Continue reading
Are We Facing A Multi-Trillion Dollar Agri-Bubble?
Ben Caldecott warns that climate change and water scarcity could leave the agricultural sector with huge stranded assets By Ben Caldecott 09 Aug 2013 The boom in agricultural commodity prices has sparked significant interest in agriculture as an investment opportunity. After declining in real terms throughout the 1980s and 1990s, international food prices began rising in 2002 and this began the longest commodity boom since 1945. Low returns in equities and bonds, exacerbated by the financial crisis, have also encouraged investors to look to new areas in search of higher risk-adjusted returns. As new resources have flowed into agriculture, investment has risen in several emerging markets such as Brazil, Nigeria, China, India and parts of Europe. Even the more established agricultural powerhouses of North America, Russia and Australia are experiencing resurgent conditions. This has helped to push up global farmland asset values by more than 400 per cent since 2002. ‘Stranded assets’, where assets suffer from unanticipated or premature write-offs, downward revaluations or are converted to liabilities, can be caused by a range of environment-related risks. If and when environment-related risks materialise they can result in stranded assets across the agricultural supply chain. This could be at a sector or asset-specific level, such as with respect to processing facilities, or be felt across an entire commodity or region, potentially resulting in significant financial losses, degraded ecosystems and social upheaval. The University of Oxford’s Smith School of Enterprise and the Environment has published new research today that maps out these risks in agriculture and shows how they might affect agricultural assets. This is particularly relevant now given how much capital has been invested into the sector over a relatively short period of time. The risks investigated range from the spread of pests and diseases through to changing biofuel regulations. The research systematises the different risks that could affect assets across the agricultural supply chain and completes a high-level assessment of where and how risks might affect these assets. A high-level Value at Risk assessment (VaR is a measure of risk used in the capital markets and by financial regulators) has also been completed to give an indication of the magnitudes of capital exposed. As part of the VaR analysis we set out three scenarios to test to what extent declining natural capital could place the stock of invested capital in agriculture at risk globally: the first scenario represents current levels of natural capital, the next a medium level of loss of natural capital, and third a situation of extreme loss of natural capital. Each of these scenarios represents escalating levels of risk. Under the extreme loss of natural capital scenario, we found that the loss measured by the 0.5 per cent VaR could almost double from $6.3trn to $11.2trn. In other words, there is a 0.5 per cent chance of the annual loss being more than $11.2trn. The research also found that under the same scenario, but at the five per cent VaR, there is a 1/20 chance of the annual loss being greater than $8trn. At both the 0.5 per cent and five per cent VaR there is clearly significant potential for asset stranding. The 0.5 per cent VaR is of interest to the insurance sector as this corresponds to the Solvency II regulation, which requires insurers to determine their solvency capital requirements at this level of risk. The speed at which risks materialise is also important to understand, with fast-moving risks being harder to manage than slower-moving ones. For example, regulatory change is often fast moving, but, at the other end of the spectrum, physical risks such as climate change tend to manifest themselves more slowly. As well as the speed of change, understanding when risks are likely to materialise is essential. Risks can be classified along a continuum from the short term to the very long term. For example, biofuel regulation is part of current problem agendas facing many governments. At the other end of the spectrum, classic problems of the commons such as declining ecosystem services, water quality and land degradation are longer-term risks. Such problems often take a long time to manifest themselves, and are difficult to remedy once they have occurred. In addition to investigating the timing aspects of environment-related risks in agriculture, the research has evaluated how asset stranding might affect different types of agricultural asset to indicate sensitivity to each risk factor. The research has applied this evaluation to natural assets (e.g. farmland water), physical assets (e.g. animals, crops, on-farm infrastructure ), financial assets (e.g. farm loans, derivatives), human assets (e.g. know-how, management practices) and social assets (e.g. community networks) respectively. There are three main conclusions that are emphasised throughout the research from Oxford’s Smith School. First, environment-related risk factors are material and can strand assets throughout the agricultural supply chain. The amount of value potentially at risk globally is significant. Second, the potential challenge of stranded assets in agriculture is currently being exacerbated by an ongoing agricultural boom, which is feeding off high commodity prices and poor investment returns elsewhere in the economy to push farmland values to record highs in many markets. Third, understanding environment-related risks that can induce asset stranding can help investors, businesses and policy makers to develop effective risk management strategies, which can improve resilience and minimise value at risk. Businesses, investors and governments are increasingly facing complex risks, embedded in local markets, but with global consequences. Environment-related risks in agriculture are of this nature and can have knock-on effects elsewhere in society. For example, the Arab Spring has demonstrated how water supply constraints in North Africa, coupled with extreme weather in Russia, can affect food security and prices and contribute to governmental collapse and broader geopolitical tension. So while it may be impossible to completely prevent or accurately forecast how environment-related risks might materialise, much of recent history has reminded us that people do not make reasonable preparations for risks that have been foreseeable. Investors, businesses and policy makers need to take steps today to better manage environment-related risks across the agricultural supply chain. This will be key to ensuring the sector’s long-term environmental, as well as economic, sustainability. Ben Caldecott is a co-author of the report, Stranded Assets in Agriculture: Protecting Value from Environment-Related Risks, which can be downloaded here Continue reading
