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Tax relief should target longer farm tenancies
Published June 5th, 2018
The Tenant Farmers Association (TFA) has called for a radical change in the operation of Agricultural Property Relief (APR) in its response to the call for evidence issued by the Office for Tax Simplification for its Inheritance Tax review.
TFA Chief Executive George Dunn said “For many rural landlords the taxation framework within which they operate has a major influence over the decisions they make about how they manage their land. The TFA believes that the Government should be using this sensitivity as leverage to achieve wider objectives for the resilience and sustainability of the tenanted sector of agriculture.”
The introduction of the Agricultural Tenancies Act 1995 represented a major deregulation of the agricultural let sector. Farm Business Tenancies (FBTs) were ushered in with the intention of improved efficiency of land use, whilst increasing opportunities for both progressing farmers and new entrants within the agricultural sector.
“Over two decades on and the TFA believes that neither of these objectives have been attained. Whilst we saw an increase in the amount of let land through the early years of the new legislation this has, by and large, tailed off. However, the biggest failing has been the perpetuation of short lengths of term leading to inefficiency. Short term tenancies are holding back progression, investment and sustainable land use. FBTs have been too short for too long and now is the time for that to change,” said Mr Dunn.
A big advantage to the taxpaying landlord is the ability to have 100% APR from Inheritance Tax for the agricultural value of their holdings let after the 01 September 1995. However, the TFA questions whether this relief should be so widely available. In circumstances where landlords choose to let for short lengths of term, there is little in the national interest to be gained from providing landlords with such a generous tax advantage.
“There needs to be a radical reform of the Inheritance Tax framework for agricultural land as it applies to landlords. Allowing for exemptions for specialist cropping lets on a rotational basis, APR should be abolished except in relation to land let for 10 years or more without a landlord’s break clause,” said Mr Dunn.
“Using changes in APR to improve the average length of term on FBTs will impact positively on the productivity, resilience and sustainability of the tenanted sector of agriculture, which is now responsible for farming around a third of the agricultural area of the country,” he added.