When an asset becomes of negligible value, it is possible for Capital Gains Tax (CGT) purposes, to treat it as having been sold and immediately reacquired for nil value.

BPS entitlements became of negligible value on 15 May 2023 following the final claim.

If the BPS entitlements had been purchased or inherited as part of a farm business since 2005, then they will have a base cost for CGT purposes and a capital loss can be crystallised. This could be particularly valuable to anyone who has made capital gains in the 2023/24 tax year as the loss can be offset against the gain, reducing the CGT payable. Any unused capital loss can be carried forward to be offset against future capital gains.

As an example, if BPS entitlements had been acquired at a cost of £50,000, then a capital loss of £50,000 has arisen and can be claimed for 2023/24. If a residential property was sold in the same tax year realising a chargeable gain of £100,000, the CGT due can be reduced by as much as £14,000 (£50,000 at 28%).

Whilst it should be relatively straightforward to work out what was paid for any BPS entitlements acquired, it may not be so easy with any entitlements that have been inherited, as assigning a specific value to them may have been overlooked on the grounds that the business will have qualified for IHT relief (Business Property Relief or Agricultural Property Relief).

If on either occasion, the values of the land and entitlements were not separately shown, it should be possible to obtain this split retrospectively by contacting your land agent.

If you would like to discuss this matter further contact a member of the Agricultural Team .

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