Cumbrian farming tenants handed notice for IHT reasons

The Tenant Farmers Association is calling for constructive talks between tenant farmers and two big farming estates amid concerns the landowners are seeking to take back land from tenant farmers to rearrange estate activities to meet inheritance tax (IHT) rules.

Trustees of the privately owned Lowther and Lonsdale estates in Cumbria have served notices on many tenants, explaining that they need to increase the amount of activity from a trading perspective to meet the Balfour case threshold.

The Balfour case (2010) established that estates with a considerable amount of investment and assets, such as residential property, could still benefit from business property relief (BPR), which provides 100% relief from IHT, if the majority of the activity within the estate was trading activity.

See also: New landlord-tenant code of practice delights farm leaders

George Dunn, chief executive of the Tenant Farmers Association (TFA), said the trustees of both estates did not consult or communicate with any of the tenants about how they could meet the Balfour case threshold.

Instead they decided to serve notices to quit on those who had grazing licences or tenancy agreements nearing their end, “when otherwise they would have expected agreements to have been renewed”.

Mr Dunn said the trustees’ actions “sent shockwaves” through the tenant farmers across the two estates. About 120 tenant farmers could be affected.

Last week, the TFA and The Farmer Network held a meeting at Penrith Auction Mart which assembled about 60 tenant farmers to discuss solutions to work with the estates to protect their IHT position, such as joint ventures.

New code

Mr Dunn said the TFA was waiting for a response from both estates to see whether they were willing to engage with tenants.

It comes as Defra published a new code of practice to regulate the conduct of landlord-tenant relationships for the tenant farming sector in England.

“The new code of practice had its first test in the week before it was published, in the sense that Lowther and Lonsdale were certainly not in the top rank of landlords following its ethos,” said Mr Dunn.

The TFA is due to hold talks with the land agent of the Lonsdale Estate next week. 

The two estates together cover about 48,500ha of land in the Lake District – Lowther covers more than 36,000ha and Lonsdale 12,000ha.