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Opinion: George Dunn, chief executive of the Tenant Farmers Association

farm lifeBusinessRural Development

As the dust settles on the General Election, the new Government must work to improve the resilience of farm tenancies. The deregulatory experiment which was the Agricultural Tenancies Act 1995, running now for 22 years, has failed in its objectives to increase the area of let land, provide more opportunity for new entrants and improve the economic efficiency of the sector.

 

The short-term nature of Farm Business Tenancies (FBTs), with average lengths of term consistently under four years, is a major problem. Farming is a long-term endeavour requiring significant capital investment, patience, good soil management and the ability to balance profitable years against the bad.

 

None of this is assisted by the shockingly short lengths offered on FBTs. Landlords are reluctant to use anything like the full flexibility of the statute, but have gained considerably from it and associated tax changes. With much higher demand than supply, landlords can offer shortterms for high rents at very little risk and obtain, into the bargain, 100 per cent Agricultural Property Relief from Inheritance Tax.

 

By contrast, the short-term nature of tenancies holds back progression, investment and sustainable land use. There are five straightforward steps to change this:

 

  • Restricting the generous, 100 per cent Inheritance Tax relief (currently available to all landlords regardless of the length of time for which they let land) only to those letting for 10 years or more.
  • Clamping down on those landowners who are using share farming, contract farming, share partnerships and grazing licences as thin veneers of trading activity as vehicles for aggressive tax avoidance where they in practice take no risk, have no entrepreneurial input and lack any management control.
  • Offering landlords prepared to let land for 10 years or more the ability to declare their income as if it was trading income for taxation purposes.
  • Reforming Stamp Duty Land Tax to end the discrimination against longer tenancies.
  • Requiring landlords over whom the Government has influence (for example, The Crown Estate) to default to using 10-year plus farm tenancies.

 

Some landlords are nervous about letting long-term given the difficulties which can occur when bringing a tenancy to an end for a tenant’s breach, chiefly for non-payment of rent. The Tenant Farmers Association (TFA) would be prepared to see easier to use provisions for handling such breaches in long-term agreements.

 

Also, where landlords obtain development opportunities, the TFA would be happy to see easier to use termination provisions in longer tenancies, subject to fair compensation to the tenant. Finally a word to landlords’ agents.

 

Achieving the highest rent for the shortest term should not be the only considerations when letting land. Sustainable solutions for both parties and for the benefit of the wider economy must form part of the analysis.

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