Tax rules encouraging short-termism say tenants
Tenant farmers are calling for changes to the wider taxation policy to help persuade landowners to drop the current shortterm approach to leasing land – and encourage them to rent ground out on longer-term leases.
With a review of tenancy legislation currently under way in England and Wales, and with several aspects of the Scottish Land Reform Act yet to be implemented, tenant associations on both sides of the Border have called for changes in the rules surrounding agricultural property relief from inheritance tax which is widely used to escape large duties by landlords.
“Currently, landlords are able to protect their let agricultural estates from inheritance tax regardless of the tenancy terms they offer,” said English Tenant Farmers Association chief executive George Dunn.
He said that, with the vast majority of land leased out under agreements which lasted five years or less, the benefits to the sector were not yielding nearly enough value for the generous tax advantages granted to landowners:
“The TFA believes that if this relief was restricted only to those landlords prepared to let for ten years or more, we would see more
sustainable tenancies produced as a result,” said Dunn.
He said that while bothuk and Welsh governments were involved in consultations on legislative change for farm tenancies, the UK Treasury should also become involved, looking afresh at how it could use fiscal levers to deliver longer-term farm tenancies – as the current short-termism was holding back progression, investment and sustainable land use amongst tenants.
Chairman of the Scottish Tenant Farmers Association, Christopher Nicholson echoed the sentiment, stating: ‘With fiscal policy largely a matter reserved for Westminster, STFA share frustration with English tenant farming representatives that the Defra consultation does not look at changes to the taxation framework within which farm tenancies operate.
“Like Scotland, agricultural productivity south of the Border is suffering from very short term leases with over 80 per cent of new tenancies being let for five years or less.”
Nicholson said that lessons could be learned from Ireland, where the introduction of new tax relief rules in 2015 aimed at encouraging longer lets had been shown to have swift and significant effects on the sector.
Commenting on the wider changes being considered south of the Border, Nicholson said they contained many “long overdue and common sense proposals” to reform English and Welsh farm tenancy legislation.
He said that many of the far reaching proposals mirrored recent reforms to Scottishlegislation,including giving tenants the right to diversify – a source of income which has said was likely to become of increasing importance in the postbrexit world.
“Anyone familiar with all the changes to Scottish farm tenancy legislation since the first Holyrood parliament in 2003 will be struck by the similarities with these English and Welsh proposals,” he said.” The few lone voices who have persisted in questioning recent changes to Scottish tenancy legislation now appear out of touch as the English and Welsh embark on similar reforms.”