Farmers protest outside Westminster today in anger at the IHT ongoing debate – expert legal view
With today’s news about farmers set to protest outside Westminster in anger at the IHT ongoing debate, Tom Gauterin, Director at national law firm Freeths, said:
“Although it is good to hear Mr Reed last week suggest that the Government is listening to farmers, today’s protests would suggest otherwise with the extent of their concerns 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 (the average farm size in Britain is around 200 acres) is not by any stretch a 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 and prevent further resentment building up. APR (IHT in general, in fact) needs reform, but the current proposals fail to achieve the government’s aims while also alienating a large part of the farming community.
“I think the issue here is that the government hasn’t understood how thin the margins even quite large farms run on are. The idea of a ‘small family farm’ ignores the reality that even for a farm two or three times that average size, it’s not being run at a large profit, so funding a hefty tax bill is all but impossible without selling some of the land. The government might more easily achieve its aims by reviewing the availability of APR for landlords.”
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