Government proposals aimed at extending farm tenancy agreements could have the opposite effect, key agricultural groups have said.
As per a recommendation in the Rock Review, the government is consulting on restricting Agricultural Property Relief (APR) to tenancies of eight years or more, in a bid to encourage landlords to offer longer leases.
But The Country Land and Business Association (CLA) and the Central Association for Agricultural Valuers (CAAV) have both poured scorn on the measure, suggesting landlords will reduce longer leases to eight years or take land out of agricultural use in favour of environmental schemes.
Jeremy Moody, CAAV secretary and advisor, said: “This does nothing for existing tenancies, reduces opportunities for would-be tenants, while many landowners could then see fiscal advantage in taking environmental options themselves rather than letting land out.”
Major step in the right direction
However, the Tenant Farmers Association (TFA) welcomed the proposal, describing it as a major step in the right direction.
The association had argued for the threshold to be 10-years before landlords qualified for APR but agreed to move forward on the basis of an eight-year term.
“Landlords will continue to be free to let land on whatever terms they desire. However, they will only obtain the taxation relief if they let for longer terms,” the organisation said.
Vision for the tenanted sector
The Rock Review is an independent report by the Tenancy Working Group setting out a vision for the tenanted sector. The document highlights a number of challenges facing tenant farmers and makes recommendations to DEFRA on how these can be met.
Ian Parker, partner at Whitely Stimpson and agricultural tax expert, gave a cautious welcome to the proposal.
Whereas there is a risk landlords might look for alternative land uses due to the change in tax position, he said he felt this will be marginal.
“Maximising inheritance tax relief is a still a major priority for landlords and whereas the number of attractive environmental schemes seems to increase on an almost daily basis, they are often not considered as an alternative to APR,” Ian said. “If the proposals are to become law, it is hoped they will be drafted in such a way as to ensure both landlords and tenants are protected.”
However, Ian encouraged any landowners concerned about the loss of APR, or interested in finding out more about how the various environmental schemes might impact on their tax position, to seek advice.
He said: “Whereas we are confident any change in law won’t impact adversely on the tenanted sector, landlords wanting to review their options and resulting tax position are welcome to get in touch.”
To speak to Ian on this subject or any other agricultural tax issue, contact him on (01295) 270200 or email ianp@whitleystimpson.co.uk.
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