FARMERS who were encouraged to turn unused buildings in to commercial units to increase the diversity of rural business may now be regretting the move as properties are handed back by cash-stricken tenants.

It means farmers can become liable for the business rates bill, making the buildings a financial millstone rather than a money generator.

Business rates are payable on empty industrial or warehouse premises after six months; for other uses rates are due after three months unless the rateable value is less than £2,600, explains Kit Harding rural partner at Carter Jonas in Bath.

“There is lots of publicity about tax avoidance, particularly questioning its morality in this time of cutbacks,” says Mr Harding.

“But farmers, already on the financial margin thanks to extreme weather and poor harvests, cannot afford to take the hit and must make a judgment over how to alleviate the problem. The courts have decided that even if a minute fraction of the premises is re-occupied, a new void period starts once it is empty again.

“It means that storing even a small amount of goods, machinery, even farm documentation, in a unit could re-start the rates clock.

“Moving the goods around several vacant units could have the effect of only paying business rates on just one over a lengthy period. Many farmers were encouraged to use these units for Self Invested Pension Schemes (SIPS) to fund their retirement.

“This creates a double whammy because they may be still paying for the conversion costs at the same time as seeing the asset value falling and eroding the eventual pension.”

“In these circumstances, I don’t think many people would criticise them for trying to mitigate their business rates bill.”