Farming is a long-term endeavour requiring signiﬁcant capital investment, patience, good soil management and the ability to balance the proﬁtable years against the bad.
Question: Why then is the average length of farm business tenancy in England and Wales less than 4 years?
Answer: With much higher demand for land than supply, landlords can offer short-terms, for high rents at very little risk whilst at the same time pocketing generous and unconstrained tax benefits.
The short-term nature of tenancies is holding back progression, investment and sustainable land use.
Farm Business Tenancies have been too short for too long and now is the time for that to change.
The TFA wants average lengths of term on Farm Business Tenancies to be 10 years or more.
To achieve this the Government needs to consider the following:
- Restricting the generous 100% relief from Inheritance Tax, currently available to all landlords regardless of the length of time for which they are prepared to let land, only to those prepared to let land for at least 10 years or more.
- Clamping down on those land owners using share farming, contract farming, share partnerships and grazing licences as thin veneers of trading activity to gain tax advantage when in practice they take no risk, have no entrepreneurial input and lack any management control.
- Offering landlords prepared to let for 10 years or more the ability to declare their income as if it was trading income for taxation purposes.
- Providing landlords prepared to let for 10 years or more with easier mechanisms to end tenancies where the tenant is in breach of the terms of the agreement or where landlords have the opportunity of development – subject to proper compensation to the departing tenant.
- Reforming Stamp Duty Land Tax to end the discrimination against longer tenancies.