HM Revenue and Customs has decided that all sales of single farm payment entitlements will be VAT rated.

Previously, VAT was only charged on stand-alone entitlement sales, but now the tax will also be levied on entitlements attached to land sales.

Carlton Collister of accountant Grant Thornton said the change would have little impact on farmers buying land because they could reclaim the VAT, although it would affect cash flows, he said.

However, Robert Hall, an agribusiness consultant at Savills, said it could make land sales more complicated because the value of any attached entitlements would have to be apportioned more carefully.

Some buyers, such as Irish investors, were also unlikely to be VAT registered, which meant land purchases could cost them more, added Mr Hall.