I do get why the UK Labour Government has proposed to change the rules on agricultural property relief[1]. It’s the case that the very largest agricultural estates pay lower average effective inheritance tax rates than the smaller estates. Large agricultural estates are not the ones who need a tax relief.
In yesterday’s budget statement a 100 per cent rate relief will continue to be applicable to the first £1 million of combined agricultural and business assets. That might sound fine to the average British householder. The problem is that in the farming world a threshold of asset value of £1 million is low.
For small holders or hobby farmers, that threshold maybe fine. However, if a productive farm is a viable “modern” business then that threshold is easily exceeded. Looking ahead, even a modest family farm, which is a going concern, is going to tip that tax balance.
On average the value of farmland is over £8000 per acre. The viable family farm I have in mind is no less than 150 acres. Naturally, that number depends on the farm, arable or livestock.
Sadly, the family farm has long been under threat in Britain. Measure like the Government’s latest tax proposal will contribute further to that decline. Why do I say that? Adding to the complexities and expense of family succession means that the next generation of farmers are likely to start their careers with even more debt than their parents.
Today’s family farming is a capital-intensive business. Just look at the price of a new milking machine or any of the latest farm machinery. If there’s a good business income, banks are more than happy to lend money. This then being secured against the assets of land and buildings. So, looking at the asset value alone says little about the viability of a farm business.
Let’s put the question – why have British family farms? Corporations and mega agri-business enterprises can satisfy all our food production needs. Cover the countryside with corporate logos and have done with this rustic tradition. Industrialise the countryside.
Honestly, I don’t think that’s what the British people want. It’s not just sentimentality. The sort of rural sentimentality that gets shown on Sunday evening broadcasts. It’s not just tradition for the sake of tradition.
Today’s family farming is excellent value. Given that we want British farmers to be, not only food producers, but custodians of the countryside, meeting societies environmental goals. That can be done more effectively by people who put their whole heart and soul into the job. There’s a commitment and dedication that comes from preserving the family line.
The Chancellor of the Exchequer has outlined how the new Labour Government will raise money. In this case there’s a need to think again. I suggest that asset value of £1 million for taxation needs to be revisited and revised upward. I do hope the new Chancellor doesn’t want to be remembered as the one who kills-off family farming in Britain.
[1] https://www.gov.uk/government/publications/agricultural-property-relief-and-business-property-relief-reforms/summary-of-reforms-to-agricultural-property-relief-and-business-property-relief
John Vincent 