Income tax relief could lift tenancies and productivity

Higher income tax relief should be made available on let land income, to increase tenancy opportunities and raise agricultural productivity, the Central Association of Agricultural Valuers (CAAV) says.

Such a policy has significantly increased farm lettings in the Republic of Ireland in recent years and the CAAV wants the UK government to adopt a similar approach.

Not only has the amount of Irish land let increased but also the average tenancy length.

Substantial increases in income tax relief were introduced from 2015 on the arm’s length letting of Irish farmland for more than five years.

Jeremy Moody, secretary and adviser to the CAAV, says: “In the first year of the increased relief, the let land area rose by 50%, and the second-year figures from 2016 tax returns, published by the Irish Revenue just this month, show a continued impressive response.”

See also: Give tax relief only on longer farm business tenancies – TFA

Tax returns point to about 121,000ha (300,000 acres) having been newly let in 2015 and 2016 on such terms, with the area let on five years and more increasing from 2% of Irish farmland in 2001 to 6% (about 267,000ha) in 2016.

Irish let sector

  • Dominated by conacre (small let) seasonal agreements, which cover about 30% of the farmed area
  • Some of the new let land is coming from conacre but some is moving direct from in-hand farming
  • The area of conacre fell by 3% in 2015, 15% in 2016 and 28% in 2017

“As land management decisions frequently take time to implement, that is a striking initial response,” says Mr Moody.

Tax receipts show that the level of relief claimed increased from €9.2m (£8.3m) in 2014 to €13.9m (£12.5m) in 2015 and €19.4m (£17.4m) in 2016.

There was a 33% increase in the number of taxpayers claiming the relief in 2015, and another 24% increase in 2016, showing that the measures have encouraged more landowners to become landlords.

One of the reasons behind the tax change was to improve agricultural productivity by moving farmed land into the hands of “trained” people, giving security for investment and improvement.

Mr Moody wants the UK government to follow the Irish example, but to follow it properly, not with a token gesture. “If you want to achieve something significant, make sure it’s big enough to work,” he says.

The TFA’s position

In its push for a minimum 10-year farm business tenancy (FBT) term in England and Wales, the Tenant Farmers Association has conceded that rent from such tenancies could be treated as trading income, in a bid to encourage landlords to let for longer terms.

At present 80% of all new FBTs are for a term shorter than five years.

Are you, like many other farms, missing out on tax claims for R&D?

If you’re a limited company, you could be eligible for tax credits if you’re carrying out R&D on your farm. For more information and to find out if you’re eligible visit our R&D tax credits page.

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