Treasury 'do not understand' how IHT changes impacts tenant farmers

The Treasury has been criticised by those in the farming industry for their ‘lack of understanding on how the proposed changes to Inheritance Tax will impact tenant farmers, with some landlords already considering what assets to sell to cover their tax bill, including tenanted land. 

Agricultural Property Relief

Mr Dunn told Farmers Guardian that some of their members have already had landlords or land agents warn them about the possibility of selling off land which is on short term FBT agreements, as well being disincentivised to invest in on-farm infrastructure, in order to meet ongoing Government regulations.

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Speaking to Farmers Guardian, NFU deputy president David Exwood said it was ‘very clear that tenants will be impacted.'

"I think they [Treasury] thought the proposed measures on Agricultural Property Relief would benefit tenants, but it demonstrates their lack of understanding on why they should have consulted on this measure before they bought it in.

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'Need to stop and consult'

Mr Exwood: "It is very clear they do not understand the full impact of this tax, and this is why they need to stop and consult and work out what the impact is, and come back with a better balanced proposal."

CLA president Victoria Vyvyan said: "Hitting farmers with tax bills that are unaffordable could force decisions about which assets to sell, including tenanted land."

Tenant farmers

She said more 'immediately' the new IHT rules could make those who have tenanted land look ‘very carefully at the type of tenancies that they can afford to have.'

"The Farm Tenancy Forum has done so much to bring landlords and tenants to a better understanding and way of working, but this IHT bill creates a disincentive to let land on a long-term contract," she said. 

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Farming protests

Earlier in the week, on the same day that tens of thousands of farmers protested outside Westminster, the Defra Secretary Steed Reed was questioned by the Efra Committee for the first time.

The chair Alistair Carmichael asked if it was ‘foreseeable' that landlords might want to end tenancies and bring assets 'back in hand to manage their tax' in the most ‘efficient way' which he said the Secretary of State had been suggesting people should do during the session. 

Land prices

Mr Reed said: "There is always a risk when you have got a landlord they might sell their asset, and there is a chance they will not as well. "

He added the changes to IHT 'might bring the value of land down', to enable tenants to buy their own land which they might not have otherwise been able to.

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Defra

"We should not look at change as inherently negative, change can bring positives as well, by reducing land value, it is possibility, not saying definite, we can open up the chance of farm ownership to young farmers, at a time when we need to get young people sector. Boosting profitability and making it more affordable are surely desirable outcomes," Mr Reed said.

The TFA said they have asked for a breakdown of figures from the Treasury on how many tenant farmers will be impacted by IHT changes. They have had no reply.