January 30, 2024
Article
The final claims under BPS were made back in May 2023. The entitlements themselves now have no value and will no longer be tradeable.
As the entitlements have no value, those who purchased their entitlements can submit negligible value claims on their 2023/2024 tax returns to recognise a capital loss. This will also include those who have inherited or been gifted entitlements.
Those in the dairy industry will remember doing negligible value claims for their Milk Quotas back in 2015.
The capital loss recognised from the BPS entitlements can be used against future capital gains from other assets, either during the 2023/24 tax year or carried forward for future years.
The capital loss recognised will consist of the purchase price of the entitlements, along with any agents or professional fees incurred as a direct result of the purchase.
Establishing the value may be more complicated where land with entitlements has been gifted or inherited which is often the case in farming businesses. Those who have been gifted or inherited entitlements should first check the legal documentation, and if the value of the entitlements is not clear, then the entitlement values should be obtained from publications, agents or valuers.
Capital gains made from the sale of other capital assets, up to the purchase value of your BPS entitlements plus your capital gains tax-free allowance of £6,000 per individual, will be free from capital gains tax. Any remaining gains are then taxed at 10% or 20% depending on your level of income (18% or 28% for residential property).
It may be possible to undertake tax planning to reduce capital gains tax and utilise these losses. For example, if a spouse plans on selling a property but they have not held any BPS entitlements, then they could transfer a share of this property to their spouse to utilise losses recorded from a negligible value claim on their BPS entitlements. Transfers between spouses are at no gain or loss.
It is worth checking with your accountant in the first instance to see what information they hold regarding your BPS entitlements. They should have a record of any purchased entitlements as part of the intangible asset register.