Changes to Agricultural Property Relief and the Future of Farming. Wait for the facts but see the risks to the tenanted sector

The Government has given away few clues to the upcoming Budget and markets have filled this vacuum with extreme scenarios of the incoming inheritance taxation policy.   

As seen from this Farmers Weekly article, Inheritance tax fears prompt sales of farmland - Farmers Weekly (fwi.co.uk), more land is reported as coming to the market and commentators are investigating reasons as as to why.

I advise clients within the land and farm markets and I wouldn’t attribute the recent influx of land supply solely to budget speculation.  The main contributors are still down to the current health of the industry: the ever-growing need for economies of scale, lack of farm succession, uncertainty in future subsidy funding, necessary investment to become compliant with the regulatory burden and volatile commodity prices.  

We need to await and carefully review the detail of the taxation changes rather than taking extreme pre-emptive actions. The range of possible outcomes are too diverse. I have heard speculative doom such as farmers selling outlying land to pay the likely increases in death duty, anticipation that Banks will pull out of existing lending agreements where the secured collateral (i.e. land value) falls off a cliff etc.   

The land agent interviewed in this FW article hit on the point which I’d make: it’s not necessarily those with the actual tax payment who are most exposed, but rather the tenant farmer who could suffer the greatest.

Generally speaking , if APR is lost then an owner occupied farmer may still find salvation in Business Property Relief. However, a Landlord of a farm tenancy doesn’t have BPR as its not deemed a qualifying business asset but rather an investment. Landlords who have enjoyed an inheritance tax exempt investment asset may re-think their investment strategy which would be hugely concerning for their tenants.  

It's this unintended consequence of a change to APR policy which could hit the tenanted sector which genuinely requires support in these changing times.   Charlie Ireland recently made this point as reported by Farmers Guardian. It is in the Budget’s capability to find a means of supporting the tenanted sector through the reform of this tax policy, as was identified by the work undertaken in the Rock Review (2023).