A consultation is currently underway into proposed changes to farm tenancy Law by DEFRA. Research into availability of farm land and who is farming it suggests that too many people are holding on to land that could be better, and more efficiently, farmed by others. Two of the reasons given for this are the attractiveness of claiming farm subsidies in the form of Basic Payment and the constraining effect of old-style farm tenancies under the Agricultural Holdings act 1986. Farmers view the tenancies as too valuable to give up, but tenancy terms prevent passing on the tenancy to anyone outside the family. All to often, where there is no immediate family successor, the aging tenant holds on and farms in a traditional and potentially inefficient manner. The new proposals offer the possibility of allowing tenants to sell their tenancy to a third party for a restricted term, and while likely to be opposed by Landlords, it offers a way forward and, in my view, deserves careful consideration.
Meanwhile Labour have issued a report on a plan to tax land ownership. Author George Monbiot identifies that over 50% of the nation’s wealth is tied up in land, a far higher proportion than many other European countries. The report proposes, amongst other things, the abolition of Council Tax and Stamp Duty Land Tax (SDLT) and replacing them with a tax on land ownership at a rate of around 1% of value. This is not the first time that Labour have taken a hard look at property ownership and wealth distribution, however if these plans came to fruition, they could have significant implications for land values and family farms. While on the one hand one could have sympathy for a plan to tax those such as James Dyson who have swallowed up large swathes of the countryside mainly to hide wealth from Inheritance Tax, on the other hand the additional burden that the side effect would have on the family farm could be catastrophic. The argument is made in the report that the overall tax-take could be neutral, but as most family farms don’t generally have a great burden of Council Tax and rarely face SDLT, they would be much worse off. A typical family farm in the West Midlands might have a land tax bill of £30,000 with a saving of Council Tax of perhaps only £2,500. As with all such proposals the devil is in the detail, but the unintended consequences on small family businesses could be disastrous. What ever the outcome of Brexit, a change in government at the next election is a strong possibility and so the farming industry needs to remain alive to evolving manifesto promises and remain ready to either fight those changes or, more likely, prepare strategies to mitigate the effect.
Mike Taylor FRICS, FAAV is Senior Partner of Barbers Rural Consultancy LLP. 01630 692500 or firstname.lastname@example.org