They were supposed to give six weeks’ notice.
In the end, the government didn’t even offer six seconds’ notice to close the 2025 SFI scheme to new entrants, effectively locking thousands of farms out of environmental support payments.
And with the dust nowhere near settled on its previous controversial step of slashing inheritance tax relief, this latest move seemed like a proper kick in the teeth. But whereas what remains of IHT might be meagre, closing the SFI scheme could lead to it being removed altogether, Martin Anson, director of Whitley Stimpson, is warning.
Martin said:
“Closing the SFI scheme, especially without the six weeks’ notice farmers were promised, adds insult to injury after the inheritance tax debacle. “Whereas they might seem like two separate issues, they are closely related. “That’s because when funding and revenue streams are tight, farmers naturally look for ways of diversifying to make up the shortfall. But this is where they risk falling foul of the tax regime.”
The problem arises due to the amount of revenue generated from diversification projects versus the amount earned through farming activities.
If the diversification part of the business is successful and generates more income than farming, farmers could lose their entire inheritance tax relief, making it all but impossible to hand the family farm on to the next generation.
“This puts some farmers between a rock and a hard place,” Martin said. “If farm income is particularly low, farmers may be forced to diversify simply to survive. “But if that diversification is successful, they risk losing the limited amount of inheritance tax relief they have. It’s a case of being damned if they do, damned if they don’t.” Martin added that farmers considering diversification should take expert advice on the tax implications of creating a new revenue stream, and on how it might impact the farm business long-term. “Diversification is a great thing for farmers to consider,” he said. “Having multiple sources of income can only be a good thing when working in an industry as uncertain as farming. “But my advice is to take advice before you start. Proper planning should help farmers to bridge the gap left by missing out on the SFI scheme and losing the remaining inheritance tax relief they’re currently
entitled to.”
For advice on tax planning for diversification, or any other type of agricultural tax planning, contact Martin Anson on (01295) 270200 or email martinanson@whitleystimpson.co.uk