The Tenant Farmers Association (TFA) has called on the Chancellor of the Exchequer to reform rather than abolish Agricultural Property Relief (APR).
This week, the Chancellor will deliver the first Labour budget in 14 years.
TFA Chief Executive, George Dunn, said, “An ill-judged decision on APR could seriously damage the tenanted sector of agriculture, the most asset poor farming businesses in the country.”
On the assumption that the architecture of Business Property Relief (BPR) will remain largely intact, the TFA said that trading owner occupiers of farmland will continue to be able to pass down their land through the generations after death without fear of inheritance tax.
However, the TFA said that landlords who cannot access BPR will find other tax havens for their assets including taking land back in hand in an attempt to demonstrate that they are trading in order to switch from APR to BPR. That could stop the tenanted sector of agriculture coming from privately-owned estate land.
Rather than abolishing it for let land, the TFA believes that it should be available only to those landlords prepared to let for the longest tenancy terms (10 years or more) and all those already letting under secure tenancies regulated by the Agricultural Holdings Act 1986.
At the same time, it believes the government should be providing those landlords with the opportunity to deem the rental income received in respect of those secure tenancies as trading income, to assist with access to BPR across their wider estate interests.
This would deliver more sustainable agricultural tenancies and begin to reverse the trend of insecurity, according to the TFA.
It would also be beneficial if landlords had the opportunity to lock in their capital taxation position from the start of any agricultural tenancy for the full duration of the lease.
The TFA said that some exclusions will need to be introduced for land used for high-value crops, including horticulture, normally farmed in rotation. However, the general rule of supporting longer term tenancies has merit.
Mr Dunn said, “Farming is a long-term endeavour requiring significant capital investment, patience, good soil management and the ability to balance profitable years against the bad.
“With 80 per cent of all new agricultural tenancies let for five years or less, it is clear we need to nudge the market into providing a greater degree of long-term security.
“Short-term and restrictive tenancies are holding back progression, investment and sustainable land use. We can change this situation with reform of APR.” said Mr Dunn.