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Riparian owners face a dilemma. By maintaining accurate annual catch records they can prove the value of their rights for both letting and sale purposes thereby potentially improving income. However, any rise in the value of the rights may cause a significant increase in tax liability should the rights ever be sold or inherited.
Most riparian owners simply treat the income received from let fishing as income obtained from land, a passive activity as far as HMRC are concerned. Whilst there is nothing wrong with this, there is potential for owners to access certain tax reliefs against Inheritance Tax and Capital Gains Tax where those riparian owners are regarded as ‘trading’.
Whilst there is no definition of ‘trading’, it is accepted that the riparian owner would need to do more than just letting the fishing to anglers. Such additional activities may include providing a ghillie, guide books, evidence of bank improvements or pool creation.
If a ‘trading’ arrangement can be created then riparian owners could access entrepreneurs relief which essentially reduces CGT to 10% from 28%. If the fishing rights are not disposed of during the lifetime of the owner, then IHT will become chargeable at 40% unless the ‘trading’ business is able to access the Business Property Relief which provides a full exemption from IHT.
Whilst some owners would be inclined to play down the value of their rights and provide modest catch returns to the HMRC, be warned that the Environment Agency publish a report on the performance of the whole river and this information can be used by the District Valuer and HMRC to assess the value of riparian rights.
Riparian owners must always take tax advice from their own accountant, but GSC Grays are happy to help on a practical level. Whether this is dealing with angling clubs or syndicates, helping owners with licences for river works or lettings and handling the purchase and disposal of fishing rights.
For further information, please contact Phil Scott-Priestley on 01969 600 120.