Farming News - Changing Tax Is the Only Route to Sustainable Farm Tenancies

Changing Tax Is the Only Route to Sustainable Farm Tenancies

23 Feb 2021
Frontdesk / Finance

The Tenant Farmers Association (TFA) is once again lobbying for changes in the taxation framework within which agricultural tenancies operate to secure longer and more sustainable farm tenancy agreements.

TFA Chief Executive, George Dunn, said “Since the introduction of Farm Business Tenancies (FBTs) in 1995, term lengths have been pitifully short. Year on year, average lengths of term have rarely been above four years. In fact, 2019 saw one of the lowest average lengths of term on record at 3.21 years, with 89% of all new farm tenancies offered for periods of five years or less”.

The TFA argues that longer term farm tenancies are needed to ensure the sustainability and resilience of farm businesses and for the contribution that farms make to wider public goods, such as soil management, biodiversity and the sequestration and storage of carbon.

“The market is failing to deliver sustainable solutions for farm tenancies. It is driven by an overarching desire from those advising landlords to retain control and maximise flexibility to take advantage of changes in policy or alternative markets such as commercial or residential development. There is no incentive to think long term and no penalty for taking a short-term approach. Short term FBTs stifle innovation, restrict sustainable investment and prevent good soil management. The security of farm tenants is at the whim of their landlords, or more typically, their landlords’ agents’,” said Mr Dunn.

In advance of the March Budget, the TFA has written to Chancellor of the Exchequer, Rishi Sunak, to argue for the following changes in taxation:

Restricting the generous 100% relief from Inheritance Tax, currently available to all landlords regardless of the length of time for which they are prepared to let land, only to those prepared to let land for at least 10 years or more. At the same time, allowing landlords to lock in their capital taxation position from the start of the tenancy for the full duration of the lease.

Clamping down on those landowners using share farming, contract farming, share partnerships and grazing licences as thin veneers of trading activity to gain tax advantage when in practice they take no risk, have no entrepreneurial input and lack any management control.

Offering landlords prepared to let for 10 years or more, the ability to declare their income as if it was trading income for taxation purposes.

Reforming Stamp Duty Land Tax to end the discrimination against longer tenancies.

“The introduction of the new Environmental Land Management Scheme in England and the Sustainable Farming Scheme in Wales to replace the Basic Payment Scheme, are aiming for long term environmental objectives. In addition, with the increasing importance of carbon management, biodiversity net gain and the development of renewable energy, we need a much longer-term approach for farm tenancies. The market is failing to deliver what is required and the Chancellor must accept his need to act,” said Mr Dunn.