Introduction – The pandemic has focused minds on health including healthy eating, and the parallel challenges of the new trading arrangements with the EU and beyond means that UK agriculture now more than ever needs to be flexible and dynamic.
The government’s figures put the median average of farm holders in the UK in 2016 at 60 years old. That’s one year older than in 2013.
Whilst is isn’t the only factor, the inheritance taxation of farms is contributing to this with Agricultural Property Relief giving farmers an incentive to “die in harness”.
Problem – too many farms are stagnating in the hands of older semi-retired farmers.
Fix – This can be taken away by looking at the New Zealand model where the relief for agriculture is on capital gains taxation rather than inheritance tax. This relief would be targeted to encourage handing over to younger generations earlier, revitalising the industry. It would not be available for development sales.
There are hold over reliefs for capital gains tax already, but the advisors assisting farmers tend to steer them away from them.
This should not cost the Treasury money, but if it does, I believe that would be offset by allowing more farms to be in the hands of younger, innovative and most importantly active farmers.
There have been many initiatives looking at this issue, but capital grants can not hope to give younger farmers the clout needed in the land market whilst older farmers “bed block”.
Subsidies are often blamed and the “slipper farmer” regulations show that the problem is acknowledged. The scope for reform through that system is limited, especially given the list of other policy goals it is intended to deal with already.
However I believe the simplest and most far reaching solution, and the most effective, is to look at the tax system. Everything else can follow, the incremental and marginal efforts already in place will have a far bigger impact if allied with tackling the central issue in this manner.
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