The UK limited partnership will purchase farmland from incumbent farmers for around 80% of the land’s value.
The farmers, who will often be in a position where they need cash to reinvigorate their business, will then rent back the property, paying an annual rent to the partnership, and will be offered the opportunity to re-purchase the property three years later. Each quarter the partnership will aim to distribute income, generated from the rent, at a targeted annualised rate of 4%.
If a famer defaults on any of the three annual payments he will lose the right to purchase the farm and Connaught can sell it for a capital gain.
The partnership has been designed so that investors will benefit from business property relief which mitigates inheritance tax on a gift of a partnership share after the participation has been held for two years or more. Entrepreneurs’ relief may also be available if the participation has been held for the required period. Investors in the exempt unit trust should instead not be liable for tax on any accrued chargeable gains on the disposal of any farm by the partnership.
Alistair Mawdsley, Director of Connaught, said: “We are delighted to be launching The Business Partnership and to be extending our products further into the alternative assets arena. Our core supporters asked us to design an opportunity which also has the potential to mitigate IHT and after 18 months of research and development believe that we have created a very attractive proposition for this market.”
