Farming News - Rural Affairs Secretary Steve Reed - expert view suggesting that perhaps the extent of farmers concerns is yet to be fully understood
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Rural Affairs Secretary Steve Reed - expert view suggesting that perhaps the extent of farmers concerns is yet to be fully understood
Yesterday, Rural Affairs Secretary Steve Reed released a statement saying that farmers shouldn't "believe every alarming claim or headline" on changes to inheritance tax, adding that the Government is "committed to ensuring the future of family farms".
In response to this, Tom Gauterin, Director at national law firm Freeths, said:
“Although it is good to hear Mr Reed suggest that the Government is listening to farmers, these comments suggest that perhaps the extent of their concerns is yet to be fully understood. As the entire cost of APR is around £400m, this represents barely 2% of the ‘black hole’. It also seems to underplay the extent to which farmers are themselves (very hard!) ‘working people’.
“If the Government’s aim was to prevent wealthy individuals buying up farmland as an IHT strategy, it might instead have looked at abolishing APR for landlords, rather than imposing it on working farmers. As is widely known, farmers rarely make significant a significant profit – or even any profit – and are constantly at the mercy of natural factors beyond their control. The current proposals seem not to take account of this. By way of example – if a farmer and his wife own a farm worth £5million, of which (say) £500,000 is the value of the farmhouse, this would mean they are farming (at a ballpark value of £10,000/acre) around 450 acres of land.
“If that farm was then subject to APR at 20% on the excess over the allowances of the couple (i.e. everything over £1million each, making £2million total), that would give a tax bill of 20% x £3m =£600,000. Even if this was paid in (interest-bearing) instalments over ten years, this means finding an extra £60,000 income every year – which just about every farmer would consider miraculous – or selling 60 acres of land. In my example, that’s around 13% of the farm. As every farmer will also tell you, farming increasingly relies on economies of scale to be viable.
“It’s true that this will not affect smaller farms, but even a good-sized farm of 450 acres is not by any stretch big agribusiness, or able to generate sufficient extra income to maintain its integrity. Given the relatively low cost of APR to the Exchequer, it would be good to see a proper consultation on this which may help the Government target this better than it seems to be at present.”