[News] Farmers

[Harry Wilson's tackle]

I remember a pre-Brexit pub chat with a local farmer. He was pro-Brexit, but didn't see my argument that the ending of EU subsidies was likely to be a massive loss to his industry, so he was a turkey voting for Christmas.
He believed that all the support would be replaced and it would be a better system as it would be more locally managed (rather than those unelected bureaucrats in Brussels...)

I wonder what he thinks now.

I remember such conversations being had in public, on phone ins like the one I was listening to today...

 

[sparkie]

I have very little sympathy for farmers being outside of any inheritance tax.

However, I do not like the Government fiddling around the edges with using taxes which are highly targeted to certain groups. Bite the bullet and put 1p on income tax instead and share the load.

 

[WATFORD zero]

This will pan out over time.

Nicky Campbell's phone in, in 5 years time will be the demise of UK farming and a lack of food security from greater imports.

I'm guessing the 'how IHT caused the demise of UK farming and lack of food security' call in will be after the 'how Brexit caused the demise of UK farming and lack of food security' and the 'how Truss caused the demise of UK farming and lack of food security' etc etc

 

[bluenitsuj]

Harry or the government ? Or both ?

Both

 

[Bold Seagull]

Average age of a farmer in this country is 59, 33% are over 65. Most work every day of the year, long hours, most well below minimum wage and many on their own.

Just from my experience when I farmed, I made about £25 profit per pig and £18 per lamb.

There's already a crisis in farming in getting young people to work the land. Those that do inherit the family farm, where margins are so low will now be put under further financial pressure. Easy for these townies to say sell some of your land then not understanding that all the land is needed just to scrape a living.

To suddenly change the rules doesn't leave the average farmer of 59 to plan for the farms future.

At a time when we all should be looking for local sourced food this government is putting a lot of these businesses under huge pressure.

It is without doubt a very damaging policy.

When people on the radio or TV bang on about Clarkson are totally missing the point and also not listening to what he says. He, to many is just a millionaire idiot. He does though highlight the very issue faced by many many farmers. The red tape, how hard it is to make a profit. He can afford it many can't. He actually does far more good in educating people than say Countryfile that views the countryside as honey and milk.

Sorry HWT you are very wrong.

I also imagine this is where the problem is for young people - farmers not sharing ownership of their farms with their families or loyal young workers until they die.

If the average farmer is 59, then I suspect his children are between 30 and 40 having worked their arses off most of their lives to have no asset or ownership.

So you also have farm hands, farm managers etc. who can be loyal to a farm their entire lives with no share of assets or profit from the business either. In so many other businesses you can be made a partner or director and have a share of that business. Again no wonder young people think to themselves I could work a farm my entire life and having nothing to show for it.

Time farmers thought about their business and succession models - not sure the problem lies entirely with government and taxation.

 

[Thunder Bolt]

This seems to clarify some things

 

[ROSM]

The rest of Europe don't charge VAT on school fees, it's a mandatory EU block, because it's education. Private included.

Greece charged 23% vat in the last decade.

There isn't actually a block as I understand it but it's about national consistency in so much as in the eu they either all do or all don't.

The reason why they don't all do is about how schools are maintained in as much as some countries will give some maintenance even to fee paying schools in the absence of full state education.

 

[WATFORD zero]

If you pass your house and capital on to the kids, they may have to pay inheritance tax. The difference is that the house is a liquid asset.

If I'm a farmer's son, working that farm, and I inherit it, I do not have a liquid asset if I wish to maintain the business. Thus I could be landed a bill of £1m with no loose capital to pay it. The only choice I may have would be to sell the farm.

I'm not saying their shouldn't be a levy, I'm just saying this needs to be thought through. The farmer's have a point.

The government said about 500 claims each year would be affected by the changes and farm-owning couples could pass on up to £3m without paying any inheritance tax. It said its "commitment to our farmers remains steadfast".

https://www.bbc.com/news/articles/c...d about 500,to our farmers remains steadfast".

 

[ROSM]

In the same way most people can pass on £1m tax free before IHT, Farmers have special dispensation whereby they can pass on £3M before tax. And, on the remainder, instead of paying 40% tax, they have a special dispensation whereby they only pay 20% tax. So, on £5M it would be approx £400,000 which due to the further special dispensation to pay over 10 years, ends up at c40K pa, and that's before their accountants and standard business practices get hold of it.

My kids, in a similar situation, but me not being a farmer would have to pay £1.6M immediately



Ahem ... £7M

Also don't forget that the value is derived as farm land not development opportunity land. Land may commercially be 7m but its value as farmland will be less

 

[PILTDOWN MAN]

I think they are entitled to engage with this, of course, but there is a strong whiff of entitlement from some of them.

Yes I have a good pension but if I wanted to pass on a million pound property (I don't have a million pound property, by the way) I would be clobbered in tax. What the farmers are being asked to pay is a fraction of that.

I simply can't see London's finest flocking to support these people today when they rock up to protest. It is about proportion and perspective. If there is grievance then negotiate.

(and before I'm accused of some sort of left wing nonsense, I was deeply mocking of my own (former) union when some of the picket line stood grinning with Jeremy Corbyn a couple of years ago. A total moment)

If your property was your means of running your business that is handed to your family, then the need to sell to pay iht is the end of that business.

 

[Weststander]

I also imagine this is where the problem is for young people - farmers not sharing ownership of their farms with their families or loyal young workers until they die.

If the average farmer is 59, then I suspect his children are between 30 and 40 having worked their arses off most of their lives to have no asset or ownership.

So you also have farm hands, farm managers etc. who can be loyal to a farm their entire lives with no share of assets or profit from the business either. In so many other businesses you can be made a partner or director and have a share of that business. Again no wonder young people think to themselves I could work a farm my entire life and having nothing to show for it.

Time farmers thought about their business and succession models - not sure the problem lies entirely with government and taxation.

Succession models.

Farmers pass on their farms to their offspring, often through generations.

It worked.

 

[WATFORD zero]

Succession models.

Farmers pass on their farms to their offspring, often through generations.

It worked.

And they can continue to do that using the exact same methods every other Family owned business has to, to avoid it having to be sold

 

[Bodian]

They seem to have lived a simple life, with 'very little income' (some saying a few tens of thousands of pounds profit a year), but if their farm is worth more than three million pounds then, as a married couple, they will be liable to 20% inheritance tax (half what you and I pay), with this change coming in a couple of years, if they 'do nothing' to mitigate against the change.

That 'few tens of thousands profit' is generally after many of the expenses that you & I pay out of out take-home pay. Like fuel, vehicles, housing, some clothing, and so on. If I had £10k left after that, then I would be pretty happy.

I'm trying to keep up with this.
From what I understand, a farm owned by a couple will bring in an anual profit of £50K to £100K, for which they work hard.
But the value of the land will be around £5million, thus when they die and the kids take over, the kids have to pay 20% of the value. Let's say £1million tax due.
Now they can pay that over 10 years thus £100,000 a year. But that would be their entire profit gone.
Think that's how it is.
But, like anything, there are ways around this. Just needs a good accountant.

Change 'will be' for 'may be'. Not many farms up this way are worth £3m, let along £5m. And as part of the value is the inflated cost of land because of investors like Clarkson spending over the odds - then agricultural land prices should stall or drop - lessening the overall 'value' of the land. And as farmhouses are tied to the land they are valued at a lot less than the same house unencumbered by the farmland. Like shops with a live-in flat above them tied to the shop - they sell for a lot less than an identical flat on it's own. Commercial properties are far cheaper - which is why when they get change of use to dwellings the value shoots up (see country pubs).

What I still fail to get my head around is why a genuine family business isn't already structured for succession planning.

I seem to be hearing that farmers don't want to operate as modern businesses, however with my limited agricultural knowledge, the successful dynamic farms are the ones embracing technology, social media, and the business model of farming. Even without the IHT issue, it would seem farmers are missing out on potential tax benefits of being LLPs or Limited Companies that their own industry press and advice appear to be telling them.

All this IHT is seemingly avoided if genuine farming families that wish their decedents to continue their farming are properly bought into the ownership of the business earlier, and rightly so too if they are due to manage and run the farm going forward.

Because they didn't need to be - because there was no IHT. What will happen now is that succession planning will come in, and the number of genuine farms caught by IHT will drop further. But it will stop the land-bankers from gobbling up the land.

I do understand that its not easy to suddenly pay an IHT bill if your wealth is all tied up in land that is by definition hard to get at. That poses an issue for some older farmers when the new rules come in and possibly needs further thought by the govt. I know a couple a farmers and its a reasonable concern, and more complex for those who farm on land in the national park as there are more hurdles to jump over before disposing of or changing the use of land.

Not strictly true. The vast majority of farming activities (such as erecting sheds and so on) are still permitted development. And things like diversification into holiday lets and so on is positively encouraged. The only main difference is that it is harder to get change of use from farmland to housing developments. But then - that's taking land out of farming anyway - so why should they get advantageous incentives for that - it defeats the object.

 

[PILTDOWN MAN]

Time farmers thought about their business and succession models

I can assure you farmers think of this most of the time. To suddenly out of the blue to be told everything is changing without any consultation is plainly wrong. Defra didn't even know!!

 

[amexer]

Whilst there may be several family farms that will be effected surely no one agrees that the many wealthy people like Dyson and Clarkson should be able to avoid paying inheritance tax by buying a farm Clarkson made it clear at the time that this was why he purchased the farm

 

[ROSM]

If your property was your means of running your business that is handed to your family, then the need to sell to pay iht is the end of that business.

Is there an interest free option to pay IHT for farmland?

also I read a long post by Dan Niedle (major tax journalist) and he addressed how to effectively plan ahead to reduce/remove IHT impacts. This includes gifting , or spousal transfer. Which many other business and families have been doing for years.

This reduces the impacts and transfers them onto those who have bought farmland (and therefore increased values) as a way of avoiding IHT on other assets

In the things that will cause the greatest impact on farmer I think this will be behind the list of milk mark /credit , brexit and supermarket price wars in damage caused

 

[Weststander]

Also don't forget that the value is derived as farm land not development opportunity land. Land may commercially be 7m but its value as farmland will be less

Farmland without any hope of housing potential has near all time value of £9k per acre on average,

Due to competing other interests wanting to own it eg the Clarkson's.

Which is no help to genuine farmers looking to carry on. The average length of ownership is 200 years, they're not speculators.

 

[Bold Seagull]

Succession models.

Farmers pass on their farms to their offspring, often through generations.

It worked.

Until investors and those buying up farms decided to drive up prices of the land by buying to avoid IHT, then simply retaining the farmers as lease holders or however that farm business was to be managed.

We could also see farm land being available to young aspiring farmers not bought up in a farm owning family, so that say a huge farm is up for a hit of IHT, then part of that farm could be sold (not necessarily all of it, just enough to pay the IHT liability) and a young farmer could then become a farm land owner in their own right without needing to inherit and start to run their own farm.

Again, if we want a next generation of young aspiring farmers, then owning their own farms has to be an aspiration, not that farms are always locked into a cycle of inheritance.

 

[WATFORD zero]

Farmland without any hope of housing potential has near all time value of £9k per acre on average,

Due to competing other interests wanting to own it eg the Clarkson's.

Which is no help to genuine farmers looking to carry on. The average length of ownership is 200 years, they're not speculators.

But those land prices have been driven up by investors and speculators taking advantage of the lack of IHT on Farms. This has been highlighted by farmers for years now that agricultural land is trading at way above it's actual agricultural value. Shirely if this helps stop that, it is a good thing

 

[ROSM]

Farmland without any hope of housing potential has near all time value of £9k per acre on average,

Due to competing other interests wanting to own it eg the Clarkson's.

Which is no help to genuine farmers looking to carry on. The average length of ownership is 200 years, they're not speculators.

I don't disagree which is where planning ahead, gifting, spousal transfer are all key things that are needed now. That restricts the impact onto the clarksons et al