Tax changes must form part of farm tenancy reforms

The Tenant Farmers Association (TFA) is encouraging the Government to couple fiscal and legislative reform in its forthcoming plans for changes to agricultural tenancies.

TFA chief executive George Dunn said “We are pleased that the Government has signalled its intention to bring forward much needed reform to the legal and policy frameworks surrounding agricultural tenancies, but it must not miss the opportunity to reform the taxation environment within which agricultural tenancies operate. Tax is a major driver in the land market and for the decisions land owners make about land occupation. Significant, positive change can be achieved with a small number of sensible tax reforms”.

The top three tax changes the TFA would like to see are:

* Restricting Agricultural Property Relief from Inheritance Tax on let land only to land let for 10 years or more.
* Abolishing Capital Gains Tax rollover relief for new land purchases but extending relief to investments in fixed equipment on let land.
* Abolishing Stamp Duty Land Tax (SDLT) on agricultural tenancies.

“Whilst some are calling for the abolition of Inheritance Tax Relief on farm land, this would be a mistake. History shows this simply leads to unnecessary estate fragmentation and negative restructuring. Instead, we should promote best practice by restricting the relief to land let on the most secure tenancies – those of 10 years or more. There are too many short term farm tenancies which stifle investment, good soil and environmental management and farm business resilience. Promoting longer term tenancies will benefit us all,” said Mr Dunn.

“A major driver of inflation in the land market in recent years has been the availability of Capital Gains Tax rollover relief. Individuals who have made sizeable capital gains elsewhere in the economy have been drawn into the land market as a safe, tax efficient investment driving up its price to unsustainable levels. This has got to stop,” said Mr Dunn.

“The TFA would like to see the abolition of Capital Gains Tax rollover relief for land purchases, with exceptions for those who have lost land through compulsory purchase. Instead, there should be a new relief for investments into fixed equipment on to let land which will assist its productivity, resilience and sustainability,” said Mr Dunn.

“In the farming context SDLT makes no sense at all. This tax penalises longer tenancies but these are exactly what we need in farming. SDLT might make sense in the commercial sector where large corporations seek to avoid tax by using long leases with developers but it has no place in the farming world and should be abolished,” said Mr Dunn.

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About The Author

Deputy editor of Agronomist and Arable Farmer as well as responsibility for the Agronomist and Arable Farmer and Farm Business websites. After 17 years milking cows on the family farm John started writing about agriculture in 1998 and has since written for a variety of publications and has developed a wide circle of contacts within the industry. When not working John is a season ticket holder at Stoke City and also of late has become a fitness freak, listing cycling, swimming and walking as his exercises of choice.