BIM55240 - Farming: receipts and expenses: compensation for notice to quit given by a landlord

An outgoing tenant farmer may be entitled to statutory compensation under Section 60 of the Agricultural Holdings Act 1986. The compensation (normally amounting to five times the annual rent of the holding) is payable where the tenancy of an agricultural holding terminates by reason of a notice to quit given by the landlord and, in consequence of that notice, the tenant subsequently quits the holding. It is intended, inter alia, to compensate for ’the loss or expense directly attributed to the quitting of the holding which is unavoidably incurred by the tenant upon or in connection with the sale or removal of his household goods, implements of husbandry, fixtures, farm produce or farm stock on or used in connection with the holding, including ’any expenses reasonably incurred by the tenant in the preparation of the claim for basic compensation'.

This statutory compensation should not be regarded as a trading receipt. Where, however, the recipient continues farming operations, the amount of any expenditure covered by the compensation payment should be excluded in computing the trading profits. As regards CGT, see CG72380 onwards.

The total compensation received by an outgoing tenant farmer may include elements other than statutory compensation under the Agricultural Holdings Act. Any such elements should be dealt with in accordance with the general principles set out at BIM40100 onwards. As regards tenant right, see BIM55245.