‘Final plea’ on tax relief to chancellor Reeves before Budget

Farm leaders have put in a final plea to chancellor Rachel Reeves ahead of this week’s Budget, not to end or tamper with agricultural property relief (APR) from inheritance tax (IHT).

Speculation has been mounting in recent weeks that changes to APR will feature in the Budget on Wednesday (30 October) as one of the few levers available to Ms Reeve to bolster her tax revenues.

See also: CLA reveals dangers of removing inheritance tax relief

As such, leaders of the four main UK farming unions (NFU, NFU Cymru, NFU Scotland and the Ulster Farmers Union) have written to the chancellor, explaining the “crippling effects” that changes to IHT reliefs would have on family farms, tenant farmers, domestic food security and environmental delivery.

“Returns from farming are often extremely modest, with the return on capital employed for farming, after taking into account a wage for the farmer, averaging less than 1%,” says the letter.

“This means that the vast majority of farm owners would be unable to meet any IHT charge (without selling land).

“Just as importantly, APR is also a crucial aspect driving the availability of farm tenancies across the UK.

“If APR were to be abolished or curtailed, many landowners – large and small – would no longer be incentivised to ensure their land is farmed.

“There is a very real risk that the removal or curtailment of APR will cause a major contraction of farmland being made available for tenancies or contracts, which is often the lifeblood of small family farm businesses and a critical entry point for young and first-time farmers.”

‘Devastating blow’ 

NFU president Tom Bradshaw said the loss or changes to APR would be a devastating blow to British farming for generations to come.

“It’s hard to see anything which would destroy the new government’s relationship with farmers more completely, or do more damage to family farm businesses, be they the owners of farms or the tenants who farm them for the landlord,” he said.

“Changes to vital IHT reliefs for farm businesses don’t only threaten our food security, but also the shared ambition with government to protect and enhance our environment.

“Without the farm businesses there to manage the land and invest in environmental and biodiversity delivery, legislated targets could be in jeopardy.”

Some reform

The Tenant Farmers Association has added is voice to the concern raised by the four main unions, though it is advocating some reform to APR.

It fears that, if APR is abolished but business property relief (BPR) is left intact, then landowners will have an extra incentive to take land back in-hand “in an attempt to demonstrate that they are trading in order to switch from APR to BPR”.

“That would effectively kill off the tenanted sector of agriculture coming from privately owned estate land,” it says.

But the TFA still supports some reform to APR.

Rather than abolishing it for let land, the TFA believes that it should be available only to those landlords prepared to let for 10 years or more, and all those already letting under secure tenancies regulated by the Agricultural Holdings Act 1986. 

“At the same time, we should 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,” it adds.