UK should copy Irish farmland tax move says CAAV

The UK Government should adopt a key change in Irish tax law to encourage the letting of land and boost agricultural productivity, according to the Central Association of Agricultural Valuers (CAAV).

This comment follows a review of the Irish land market by a recent change to tax law that has significantly boosted both the amount of land in the let sector and the average length of tenancy.

“The Irish Government introduced substantial increases in Income Tax relief from 2015 on the arm’s length letting of farmland for more than five years,” said Jeremy Moody (pictured above), secretary and adviser to the CAAV, adding that in the first year of the increased relief, the let land area rose by 50%, and that the second-year figures from 2016 tax returns show a continued impressive response.

“Tax returns point to around 300,000 acres having been newly let in 2015 and 2016 on such terms, with the area let on five years and more increasing from 2% of Irish farmland in 2001 to 6% (c.660,000 acres) in 2016. As land management decisions frequently take time to implement, that is a striking initial response.”

CAAV explained that with the Irish let sector wound down a century ago, Irish landowners have since only used conacre seasonal agreements, which cover around 30% of the farmed area. While some let land is coming from that conacre, some is also moving directly from in-hand farming.

“The area of conacre fell by 3% in 2015, 15% in 2016 and 28% in 2017, suggesting a progressive shift to longer term lettings as desired by the Irish government, as well as drawing more land into the let market,” said Mr Moody.

“Tax figures show that the level of relief claimed increased from €9.2m (£8.3m) in 2014 to €13.9m (£12.5m) in 2015 and €19.4m (£17.4m) in 2016. With a 33% increase in the number of taxpayers claiming the relief in 2015, and another 24% increase in 2016, these measures have encouraged more landowners to become landlords.

“One of the driving reasons behind the tax change was to improve agricultural productivity by moving farmed land into the hands of ‘trained’ people, giving security for investment and improvement. Based on a large econometric study, that was found to be two or three times as effective as moving land out the hands of the over-65s, resulting in a 12% gain in overall production. Such a gain would be a major and necessary boost for farming’s profitability and resilience.”

Mr Moody believes that with the British Government looking to boost agricultural productivity, the hard evidence from the Irish Revenue shows this tax relief is having rapid and long-term effects.

“This demonstrates how tax relief can open up land occupation in the UK, providing important flexibility to handle the changes and challenges post-Brexit,” he said. “I’d urge the Government to follow this and follow it properly, not to make a token gesture.

“If you want to achieve something significant, make sure it’s big enough to work.”

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About The Author

John Swire - 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.