The Tenant Farmers Association (TFA) is bitterly disappointed that the Chancellor of the Exchequer has closed the door on the idea of restricting Agricultural Property Relief from Inheritance Tax only to those landlords prepared to let on a long-term basis.
For many years the TFA has argued for change in the taxation rules under which rural landlords make decisions about letting land to encourage longer term and more secure Farm Business Tenancies (FBTs). Those changes would have enhanced the ability of the let sector of agriculture to meet the dual challenges of achieving productivity growth, as part of our food security and delivering environmental outcomes for landscape, biodiversity and tackling climate change.
Achieving those joint goals is a huge challenge when the average length of FBT agreement, covering half the tenanted land in England and Wales, is only just over three years and when over 80% of all new tenancies are let for five years or less. To change that dynamic, the TFA had argued that landlords, who now have unrestricted access to Agricultural Property Relief on any land that they let, should only have access to valuable inheritance tax relief if they let for more than 10 years. However, the report of the Rock Review into agricultural tenancies argued that the bar should be set slightly lower, at 8 years.
TFA Chief Executive, George Dunn, said, “Whether the bar was set at 8 years or 10 years, restricting agricultural property relief from inheritance tax would have been the right thing to do. What is the public benefit of that massive state support to the landlord sector if it continues to offer such restricted security of tenure.”
“Everyone agrees that longer term tenancies provide the best basis for funding investment, delivering productivity gains and securing environmental objectives. Long term agreements also mitigate against the use of land in environmentally damaging ways by those who may only have a short-term interest and who will seek to exploit that interest to the detriment of long-term and wider public benefits. However, what is clear, is that this cannot be left to market forces alone. The market is not delivering sustainable agreements and this market failure could have been addressed through the changes the TFA had proposed to Inheritance Tax relief,” said Mr Dunn.
“Sadly, a coalition of organisations with a vested interest in maintaining the maximum degree of flexibility in bringing land to the marketplace have managed to persuade the treasury to keep the status quo. Instead, the government has churned out the usual platitudes and warm words about the need for more longer-term agreements, but without any concrete plans, or ideas for how that is to be achieved,” said Mr Dunn.
“The tax changes which the Chancellor has today rejected had the near unanimous support of TFA members who are at the sharp end of running tenanted farm businesses right across England and Wales. The decision made today by the Chancellor and the Government shows a disappointing disregard for the true needs of the tenanted sector of agriculture,” said Mr Dunn.