THE Government must change fiscal rules to encourage longer farm tenancies, according to the Tenant Farmers’ Association (TFA).
The organisation’s Cumbria chairman Leonard Johnston said HM Revenue and Customs needed powers to ‘crack down’ on tax arrangements which encouraged short term contracts.
He spoke out after a survey by the Central Association of Agricultural Valuers showed a decline in both the number and area of farm business tenancies (FBTs) offered by landlords and that their average length was below four years.
Mr Johnston said tax relief should only be available to landlords offering much longer tenancies – citing the ‘rare opportunity’ of a 15-year FBT recently advertised for Edgehill Farm near Ulverston, as ‘the right sort of length’.
Mr Johnston said: “Short term tenancies on arable farms are often not such a problem because they can be used by neighbouring farmers as a temporary add-on. However, for livestock farmers who need time to establish their businesses they are a much more difficult issue.
“Landlords have their tax relief restricted to FBTs that would be long enough for an individual to be able to move to a farm, introduce stock and have a good chance of making it a success,” said Mr Johnston.
TFA national chairman Jeremy Walker blamed ‘risk averse advisors’ for encouaging landlords to take decisions about land use within ‘short-term horizons focusing on taxation and government policy rather than the long-term perspective that landlords have traditionally taken’.
“We need to see a step change in this approach in 2013. The Government could look at the taxation environment within which land owners make deci-sions to encourage longer lets.
“HMRC should crack down on those contract farming, share farming and other arrange-ments which are so often set up for tax avoidance reasons while allowing landlords who let for long periods, say over 10 years, to have the same fiscal treatment as if they were farming in hand.”
Mr Walker said the Government ‘should consider scrap-ping’ the 100 per cent relief from inheritance tax applying to land in estates of landlords who are letting it for less than 10 years.
Encouraging a renaissance in the tenanted sector of agriculture would have ‘real benefits for our nation's food and environmental security’.