The Tenant Farmers Association (TFA) is encouraging the Labour Government to think again on its changes to Inheritance Tax (IHT) in light of the recent election results.

The recently held local, mayoral and by-election results need to be seen by the Governing and Opposition Parties as a huge wake up call to be more responsive to the needs of the nation. For the Labour Party, in rural constituencies, the issues of the Winter Fuel Payment, the two-child benefit cap and welfare reforms are compounded by the ill-thought through changes to IHT. This could see many of the Labour MPs elected to rural constituencies, in July of last year, lose their seats at the next General Election if the Government doesn’t accept the need to change.

TFA Chief Executive, George Dunn, said “The TFA is apolitical - we lobby all parties equally. However, inevitably, there is a focus on the Party in power which, at the current time, happens to be Labour. To that end, we understand the dual objectives of Government to bring the public finances into balance and to go after wealthy individuals who are seeking to hide that wealth from the tax system. However, we cannot stand idly by whilst the agricultural sector becomes the collateral damage for those policies.”

The TFA believes that the dual aims of the Government could be achieved whilst finessing, rather than U-turning, on what it has announced. The TFA is seeking the following reasonable changes:

• Doubling the zero-rate threshold for Agricultural and Business Property Relief (APR and BPR) to £2 million.

• Allowing the zero-rate threshold to be transferable between spouses and civil partners.

• Providing a shorter timescale for very elderly and terminally ill individuals to pass down their business assets to the next generation without incurring tax.

• Giving landlords letting land to tenants on secure agricultural tenancies and on Farm Business Tenancies let for 10 years or more, the opportunity to include the value of that land within their zero-rate band for IHT.

• To amend the rules which see the IHT residence nil rate band begin to diminish for estates beyond £2 million in value.

• Abolishing or significantly curtailing Capital Gains Tax business assets rollover relief which allows wealthy individuals to avoid tax when purchasing agricultural land.

“£1 million, which is the current zero rate threshold announced by the Chancellor, sounds like a lot of money. However, with agriculture being a capital-intensive business, adding together machinery, livestock and land quickly gets you into very high capital values. Against that, the market dynamics mean that despite those high capital values, the income or return on capital to farmers is relatively modest,” said Mr Dunn.

“Whilst younger and healthy individuals have time to tax plan, older and terminally ill farmers will not have that opportunity. Hitting these individuals out of the blue with a huge tax rise is at best careless and at worst capricious. We need to give these vulnerable individuals the opportunity to respond appropriately,” said Mr Dunn.

“For the tenanted sector of agriculture, we do not believe for one moment the Chancellor of the Exchequer understood the implications of her announcements. However, she can correct for this by introducing the changes we have outlined for landlords letting on secure tenancies and FBTs of 10 years or more,” said Mr Dunn.

“If the Chancellor of the Exchequer really wants to raise money quickly and target cash rich individuals, she should take the opportunity to change the rules on Capital Gains Tax business assets rollover relief. This is the point where there is cash in the system available to pay tax coming after someone has disposed of assets and are then looking for tax efficient ways of investing that cash. For these ‘new money’ individuals investing in land still makes sense from a tax saving perspective. Significantly curtailing or abolishing this relief is something the Government should be considering,” said Mr Dunn.