[News] Farmers

WATFORD zero said:

You know you're not the first to have thought that

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dsr-burnley said:

Are you arguing that businesses with expensive propertyshould be forced to sell up as well? And if so, is it a good thing?

Perhaps something could be done on the basis that land is passed on free of IHT, but if and when it is sold, CGT is charged on the original, presumably negligible, cost.

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Thunder Bolt said:

Why did Margaret Thatcher exempt the farmers in 1984, and prior to that, what was the criteria for IHT for farms? Was is 40% like the rest?

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abc said:

A good question that I didn't know the answer to, so I emailed a friend's father who was (now retired) a rural land agent around that time. I've simply cut and pasted his reply - its long but maybe of interest:

Farmland values had been largely static throughout the 20th century until the 1980s when non farmers started to see land as an investment, initially by City traders in order to avoid capital gains tax (via roll over relief). Up to this point farmland values roughly reflected their income earning capacity when farmed. This was the start of making farmland unaffordable for ordinary farmers. It had the greatest impact on the poorer farmland as the land quality was irrelevant to the outside investor and values increased by the largest percentage where farming was financially most challenging, such as on hill farms and crofts.

In 1984 the Conservative Government responded to lobbying from the farming unions by exempting farmland for IHT. Prior to the 1980s, passing land down to the next generation was not excessively challenging financially because value were low and the tax due was manageable without selling the farm or its assets. The breaking of the link between land values and productive capacity reversed this and the IHT exemption was introduced to stop the breakup of, in particular, family farms. It is interesting to note that there was no concern about food security at this time with butter and grain mountains the order of the time. The motivation appeared to be one of ‘fairness’, though of course this is something of a subjective noun.

Ironically the IHT exemption created another very attractive tax planning tool for non farmers and land values increased further and faster. In terms of farming succession this didn’t matter due to the exemption rules but the link between food production and land values was distorted further. I believe land values in Sussex for farmland without development potential hovers around £15000 per acre today. For farmers to buy land, pay interest on a loan and make a small profit, the same acre would need to fall to a value of c.£2000/acre. Extraordinarily, this is less than was required in the 1980s.

You didn’t actually ask me my view on the budget change vis a vis IHT but I will give it to you anyway! The IHT exemption has enabled outside wealthy investors and institutions to buy up land entirely for tax mitigating purposes. This has massively distorted values and the taxpayer has missed out on possibly billions of pounds of revenue over the last 40 years. It is, to me, quite understandable that any government would want to act against what is ultimately a consequence that was never intended when the exemption was created.

However, I do believe there is a justification and a need to maintain the exemption for what I might loosely term a ‘proper farmer’. I am sure there are various potential methods available to the chancellor, especially one that has access to everyone’s tax returns.

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abc said:

A good question that I didn't know the answer to, so I emailed a friend's father who was (now retired) a rural land agent around that time. I've simply cut and pasted his reply - its long but maybe of interest:

Farmland values had been largely static throughout the 20th century until the 1980s when non farmers started to see land as an investment, initially by City traders in order to avoid capital gains tax (via roll over relief). Up to this point farmland values roughly reflected their income earning capacity when farmed. This was the start of making farmland unaffordable for ordinary farmers. It had the greatest impact on the poorer farmland as the land quality was irrelevant to the outside investor and values increased by the largest percentage where farming was financially most challenging, such as on hill farms and crofts.

In 1984 the Conservative Government responded to lobbying from the farming unions by exempting farmland for IHT. Prior to the 1980s, passing land down to the next generation was not excessively challenging financially because value were low and the tax due was manageable without selling the farm or its assets. The breaking of the link between land values and productive capacity reversed this and the IHT exemption was introduced to stop the breakup of, in particular, family farms. It is interesting to note that there was no concern about food security at this time with butter and grain mountains the order of the time. The motivation appeared to be one of ‘fairness’, though of course this is something of a subjective noun.

Ironically the IHT exemption created another very attractive tax planning tool for non farmers and land values increased further and faster. In terms of farming succession this didn’t matter due to the exemption rules but the link between food production and land values was distorted further. I believe land values in Sussex for farmland without development potential hovers around £15000 per acre today. For farmers to buy land, pay interest on a loan and make a small profit, the same acre would need to fall to a value of c.£2000/acre. Extraordinarily, this is less than was required in the 1980s.

You didn’t actually ask me my view on the budget change vis a vis IHT but I will give it to you anyway! The IHT exemption has enabled outside wealthy investors and institutions to buy up land entirely for tax mitigating purposes. This has massively distorted values and the taxpayer has missed out on possibly billions of pounds of revenue over the last 40 years. It is, to me, quite understandable that any government would want to act against what is ultimately a consequence that was never intended when the exemption was created.

However, I do believe there is a justification and a need to maintain the exemption for what I might loosely term a ‘proper farmer’. I am sure there are various potential methods available to the chancellor, especially one that has access to everyone’s tax returns.

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Herr Tubthumper said:

Of course I’m not arguing this. I'm challenging the idea a business sitting on a big asset with marginal profit is unique.

I believe your second point is addressed by setting up as a LTD company, albeit addressed by corp tax.

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abc said:

A good question that I didn't know the answer to, so I emailed a friend's father who was (now retired) a rural land agent around that time. I've simply cut and pasted his reply - its long but maybe of interest:

Farmland values had been largely static throughout the 20th century until the 1980s when non farmers started to see land as an investment, initially by City traders in order to avoid capital gains tax (via roll over relief). Up to this point farmland values roughly reflected their income earning capacity when farmed. This was the start of making farmland unaffordable for ordinary farmers. It had the greatest impact on the poorer farmland as the land quality was irrelevant to the outside investor and values increased by the largest percentage where farming was financially most challenging, such as on hill farms and crofts.

In 1984 the Conservative Government responded to lobbying from the farming unions by exempting farmland for IHT. Prior to the 1980s, passing land down to the next generation was not excessively challenging financially because value were low and the tax due was manageable without selling the farm or its assets. The breaking of the link between land values and productive capacity reversed this and the IHT exemption was introduced to stop the breakup of, in particular, family farms. It is interesting to note that there was no concern about food security at this time with butter and grain mountains the order of the time. The motivation appeared to be one of ‘fairness’, though of course this is something of a subjective noun.

Ironically the IHT exemption created another very attractive tax planning tool for non farmers and land values increased further and faster. In terms of farming succession this didn’t matter due to the exemption rules but the link between food production and land values was distorted further. I believe land values in Sussex for farmland without development potential hovers around £15000 per acre today. For farmers to buy land, pay interest on a loan and make a small profit, the same acre would need to fall to a value of c.£2000/acre. Extraordinarily, this is less than was required in the 1980s.

You didn’t actually ask me my view on the budget change vis a vis IHT but I will give it to you anyway! The IHT exemption has enabled outside wealthy investors and institutions to buy up land entirely for tax mitigating purposes. This has massively distorted values and the taxpayer has missed out on possibly billions of pounds of revenue over the last 40 years. It is, to me, quite understandable that any government would want to act against what is ultimately a consequence that was never intended when the exemption was created.

However, I do believe there is a justification and a need to maintain the exemption for what I might loosely term a ‘proper farmer’. I am sure there are various potential methods available to the chancellor, especially one that has access to everyone’s tax returns.

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Dr Q said:

100 % with the farmers on this one.
Seriously embarressed now that I put my X next to the Labour Candidate in my area (who didn't win), Starmer and his cronies are slowly ripping the heart of the country (which previous Governments had begun of course)

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Rdodge30 said:

Well we will see where all the growth comes from this parliament won’t we? My prediction there won’t be any growth from what I’ve seen so far …. It will almost certainly be the fault of the previous government and Brexit though

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nicko31 said:

What would you do to get growth going ?

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abc said:

A good question that I didn't know the answer to, so I emailed a friend's father who was (now retired) a rural land agent around that time. I've simply cut and pasted his reply - its long but maybe of interest:

Farmland values had been largely static throughout the 20th century until the 1980s when non farmers started to see land as an investment, initially by City traders in order to avoid capital gains tax (via roll over relief). Up to this point farmland values roughly reflected their income earning capacity when farmed. This was the start of making farmland unaffordable for ordinary farmers. It had the greatest impact on the poorer farmland as the land quality was irrelevant to the outside investor and values increased by the largest percentage where farming was financially most challenging, such as on hill farms and crofts.

In 1984 the Conservative Government responded to lobbying from the farming unions by exempting farmland for IHT. Prior to the 1980s, passing land down to the next generation was not excessively challenging financially because value were low and the tax due was manageable without selling the farm or its assets. The breaking of the link between land values and productive capacity reversed this and the IHT exemption was introduced to stop the breakup of, in particular, family farms. It is interesting to note that there was no concern about food security at this time with butter and grain mountains the order of the time. The motivation appeared to be one of ‘fairness’, though of course this is something of a subjective noun.

Ironically the IHT exemption created another very attractive tax planning tool for non farmers and land values increased further and faster. In terms of farming succession this didn’t matter due to the exemption rules but the link between food production and land values was distorted further. I believe land values in Sussex for farmland without development potential hovers around £15000 per acre today. For farmers to buy land, pay interest on a loan and make a small profit, the same acre would need to fall to a value of c.£2000/acre. Extraordinarily, this is less than was required in the 1980s.

You didn’t actually ask me my view on the budget change vis a vis IHT but I will give it to you anyway! The IHT exemption has enabled outside wealthy investors and institutions to buy up land entirely for tax mitigating purposes. This has massively distorted values and the taxpayer has missed out on possibly billions of pounds of revenue over the last 40 years. It is, to me, quite understandable that any government would want to act against what is ultimately a consequence that was never intended when the exemption was created.

However, I do believe there is a justification and a need to maintain the exemption for what I might loosely term a ‘proper farmer’. I am sure there are various potential methods available to the chancellor, especially one that has access to everyone’s tax returns.

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nicko31 said:

What would you do to get growth going ?

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BrightonCottager said:

You don't need planning permission to change the deeds. If the farmhouse was the original and there's not been planning permission to build new homes or other non- agricultural buildings or create new planning units, there are unlikely to be planning conditions restricting the occupier of a home to an agricultural worker. And over the last few years, permitted development rights have been hugely increased to allow conversion of agricultural buildings to homes and other uses without a full planning application.

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dazzer6666 said:

Nailed it. I reckon this will be re-thought and a clear (as far as is possible) distinction brought in between 'real' farmers and Tabitha and Toby's hedge fund.

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Rdodge30 said:

As a layman my understanding is limited to be sure. To increase growth in the economy then, as the government has said, we need to increase productivity in transport, industry, retail and agriculture. As I understand it productivity in it’s simplest terms is input against output and if you increase wage bills and tax bills then output must increase by exactly the same amount just for productivity to remain the same.

So I’m scratching my head so far at the government’s policies on tax and wages.

Without any doubt whatsoever the extra costs to the retail businesses in particular will result in reduced future wage growth for staff and increased prices for customers.

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nicko31 said:

Unless we want the latter to collapse we’re gonna have to pay more tax

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Bry Nylon said:

Exactly this, is what I heard this evening.

Apparently, lights are burning long in Whitehall this evening as Treasury and Ag Ministry officials are frantically working through ‘mitigations’ that will be made available to genuine farmers, so long as NFU don’t claim a victory or call it a ‘climb down.’ Special Agricultural Exemption seems to be the term of choice at the moment.

Happily, they have a bit of time to finess the finer details, as the policy doesn’t take effect until 2027 - plus Treasury officials are apparently still locked away with Wes Streeting, attempting to find a nimble and elegant way of unwinding the imminent NI increase for GP surgeries and care homes.

It’s fair to say this issue has caught the government on the hop and created more noise than they had envisaged, something both the Ministry of Ag and DEFRA have been keen to point out in private - especially as the Treasury didn’t give sight of the IHT measure or the questionable numbers they used to base it on - to either department until the night before the budget statement.

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Farmers aged 80 and above could get exemption from inheritance tax

Exclusive: Government looks at changing rules so older farmers do not have to live for seven years after making a gift to avoid the tax

www.theguardian.com

Bodian said:

Farmers aged 80 and above could get exemption from inheritance tax

Exclusive: Government looks at changing rules so older farmers do not have to live for seven years after making a gift to avoid the tax

www.theguardian.com

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Farm inheritance tax: Bid to soften change rejected by Treasury

The department for rural affairs suggested exempting some older farmers from having to pay, Newsnight is told.

www.bbc.co.uk

Bozza said:

The Treasury already pushed back on that exact request from Defra over a week ago.

“All ministers support the policy and it will not change.”

Farm inheritance tax: Bid to soften change rejected by Treasury

The department for rural affairs suggested exempting some older farmers from having to pay, Newsnight is told.

www.bbc.co.uk

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