[News] Farmers

[nsclurker]

 

[Weststander]

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

Full disclosure on Dan Niedle, he's a member of the Labour Party and part of their National Constitutional Committee.

 

[Weststander]

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

How does that help the family passing it down a generation? Cash doesn't come into play one jot.

 

[PILTDOWN MAN]

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

So they could easily sort that by looking at when land was bought and by who. If a farm has been owned by the same family for x amount of years and is then passed down the line they are exempt. If the land was bought since Y date then the passing of that down the line is subject to IHT.

Simply that would mean existing old family farms will have an exemption. Clarkson's estate would not neither would any new land bought by an 'old' farm.

 

[ROSM]

Full disclosure on Dan Niedle, he's a member of the Labour Party and part of their National Constitutional Committee.

Yes he is. The constitutional committee is largely involved in discipline (policy, application etc).

He was also heavily critical of Labour Party manifestos in 2017 and 2019.

None of that stops him being a tax lawyer and tax journalist.

 

[dazzer6666]

Main beneficiaries here will be lawyers and accountants, getting fees for helping farmers structure their assets in such a way as to get round it.

 

[Rdodge30]

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

And would therefore probably have to sell the house? As the farmer’s kids would have to sell their livelihood…

A lot of the farmers are struggling and making £50/100k a year is not exactly the massive wages of the wealthy… especially not for the hours and days they have to work … so paying £800k back over 10 years would probably just mean selling up


I think that like the winter fuel allowance there is some sense in this IHT legislation.

Undoubtedly there are pensioners who do not need the winter fuel payment and as with John Magnier in Ireland and Bill Gates in the U.S. undoubtedly there are billionaires buying up agricultural land as a tax dodge. Unfortunately there are genuine farmers who are struggling who will be hit by the IHT legislation just as there are pensioners who are genuinely struggling who will be hit by the Winter Fuel legislation.

 

[beorhthelm]

Could you explain why, unlike everyone else, they should be able to pass on millions without paying inheritance tax?

business and farms are often asset rich with low cashflow and little cash on hand. if the state want to tax the assets they have to be sold to raise funds to pay. you break up the farm or business to pay taxes. secondary effect when family farm gets broken up the knowledgeable farmers leave altogether.

this used to happen, estates first then large farms broken up. they introduced the relief to avoid the problems IHT caused.

 

[Weststander]

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.

Profits are modest, costs high, supermarkets hold all the cards. Genuinely ITK @PILTDOWN MAN said new young folk aren't attracted to the industry.

The land when sold is being bought by the new elite, I've seen this in Sussex, a financial scammer (under police investigation) asking his neighbours what price for your land?

The market for Brightonians buying organic flour and sourdough is tiny.

 

[Rdodge30]

But all the owners have to do is give their farms to their kids and the tax is avoided

I’m not sure that’s the case ? If you were to give your primary residence to your kids in order to beat the 7 year cut off point - but you continue to live there as your primary residence- is it still exempt from inheritance tax?

 

[Weststander]

Yes he is. The constitutional committee is largely involved in discipline (policy, application etc).

He was also heavily critical of Labour Party manifestos in 2017 and 2019.

None of that stops him being a tax lawyer and tax journalist.

It's still subjective. He was involved in a radio debate a few weeks ago with a qualified tax expert with some opposing views. Neidle has been great on tax evasion, but that doesn't make him the all seeing eye on all matters taxation.

 

[Thunder Bolt]

Succession models.

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

It worked.

The ones who are affected can do that today. Just don’t die in the next seven years.

 

[PILTDOWN MAN]

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.

So these young farmers are going to get their money from where to buy the farm? You cannot expect to run a farm with any profit with less than about 100 acres. What bank is ever going to lend money to a start up business in such a low wealth creation and is known to be high risk.

 

[Justice]

If they block roads will they get five years in prison like the stop oil protestors?

 

[WATFORD zero]

And would therefore probably have to sell the house? As the farmer’s kids would have to sell their livelihood…

A lot of the farmers are struggling and making £50/100k a year is not exactly the massive wages of the wealthy… especially not for the hours and days they have to work … so paying £800k back over 10 years would probably just mean selling up


I think that like the winter fuel allowance there is some sense in this IHT legislation.

Undoubtedly there are pensioners who do not need the winter fuel payment and as with John Magnier in Ireland and Bill Gates in the U.S. undoubtedly there are billionaires buying up agricultural land as a tax dodge. Unfortunately there are genuine farmers who are struggling who will be hit by the IHT legislation just as there are pensioners who are genuinely struggling who will be hit by the Winter Fuel legislation.

If they are paying 800K, this means their farm is worth approximately £7M. I'm sure that as with any business, as long as the business is sound, there are ways to commercially fund 80K pa for 10 years on a business worth £7M, if selling off parts is not viable.

They will need to change the way they do things to fall in line with the way all other Family businesses deal with inheritance, but they will still be getting a larger part of their business exempt and paying a lower rate of IHT over a longer period than any Family run business in any other industry.

 

[BadFish]

Policy to release the stranglehold of the supermarkets would have gone well with this change.

It seems like the wrong target to me. Who has all the money? I don't think it is farmers.

 

[Harry Wilson's tackle]

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.


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).

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.

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.

Yep.

Some farmers may need to have a think, and most should at least check out their landscape, and I understand that for some it will be a shock to the system (especially those who have grown used to a bucolic existence where there was no need really to think much about anything).

 

[dazzer6666]

I’m not sure that’s the case ? If you were to give your primary residence to your kids in order to beat the 7 year cut off point - but you continue to live there as your primary residence- is it still exempt from inheritance tax?

Nope. Would be treated as a ‘gift with reservation’ and still be included in the estate for IHT purposes. Maybe working farms that have been in families for generations should be exempt You could potentially gift it to avoid IHT and still occupy it, but would have to pay a full market rent (on which the kids would pay tax)

 

[Harry Wilson's tackle]

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.

If.

(And how did it work before Thatcher gave the farmers a Golden Ticket in the 1980s?)

 

[Bold Seagull]

Profits are modest, costs high, supermarkets hold all the cards. Genuinely ITK @PILTDOWN MAN said new young folk aren't attracted to the industry.

The land when sold is being bought by the new elite, I've seen this in Sussex, a financial scammer (under police investigation) asking his neighbours what price for your land?

The market for Brightonians buying organic flour and sourdough is tiny.

So I don't disagree with that point, but the question is farms staying in family ownership and inheritance probably isn't helping that point either?

A farm subject to IHT is going to be a larger farm (presumably 50Ha+), and could for example sell a small holding 25 acre portion of land to cover it's IHT liability to a young aspiring farmer who can own his farm and have that aspiration.

I'm not sure this IHT is a catalyst for less young people to be attracted to farming. If many aren't attracted to the industry already the bigger question is why, and I wouldn't be surprised if some of it is working their arses but not getting a slice of the pie.