Budget 2014 – another missed opportunity for farm tenancies

The Tenant Farmers Association has written to Chancellor of the Exchequer George Osborne to express its disappointment that yet another Budget statement has passed by without any consideration being given to the impact of taxation on the length of agricultural tenancies let on Farm Business Tenancies (FBTs).

The TFA’s Chief Executive, George Dunn said, “Average lengths of term on FBTs are much too short. The Central Association of Agricultural Valuers suggests the average is around four years. This year’s Oxford Farming Conference research report authored by Bidwells, examined the structural change and investment needed for UK agriculture to be sustainable over the next decade. Looking at the tenanted sector of agriculture, the report rightly identified that FBTs had become too short providing little security for tenants and no confidence for tenant investment”.

“The question is what to do about it? The answer from the TFA is that we should manipulate one of the most important levers that determine land owner decision making – tax,” said Mr Dunn.

Since 1995 all landlords with land in their possession for at least seven years, have the benefit of an extremely generous tax advantage of 100% relief from inheritance tax on the agricultural value of their land regardless of the nature of the tenancy agreement offered.

“The TFA has long questioned the extent to which the taxpayer receives value for money for this subsidy in light of the apparent unwillingness of landlords to let for sustainable lengths of term. As a result, the TFA argues that this tax benefit should only apply to land let on FBTs where landlords are prepared to let on at least a 10 year basis,” said Mr Dunn.

“At the same time and to avoid landlords abandoning tenancies and utilising other platforms such as contract farming, share farming, grazing licences, share partnerships and the like, we need also to see the Government clamping down more robustly on the aggressive tax avoidance that is occurring on a broad swathe of agricultural land farmed under the auspices of sham versions of these types of agreement. The TFA has no argument with owners who use agreements other than agricultural tenancies legitimately. However, where the agreement says one thing but the practice on the ground shows another and where the land owner obtains effectively a fixed return, clearly these agreements have been drawn up only to give the land owner access to trading status for income and capital taxation purposes and should fall within the sights of the General Anti-Avoidance Rules,” said Mr Dunn.

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