IHT and compliance pressures push farms to diversify

Inheritance Tax (IHT) reforms and compliance requirements have left farm businesses in the East of England concerned and uncertain about the future.

This has resulted in a significant rise in the number of growers across the region, shifting their focus away from traditional farming methods and towards diversified incomes through non-farming activities.

Regional law firm Tees commissioned a survey of more than 200 farm businesses across the East of England, which found that 80% of respondents expected their businesses be impacted by changes to IHT.

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In order to mitigate the impact of IHT changes, almost half of businesses were considering making a lifetime gift, while just under a third planned to sell off land.

Life insurance and increasing borrowing on farm were two other common considerations by businesses looking to reduce the IHT burden.

The survey also revealed that 84% of farm enterprises were being put under strain to try and meet current compliance requirements.

A number of responses called for less red tape and a more common sense approach, citing frustration with constantly changing rules and regulations.

A Norfolk farmer said: “We’re here to produce food at the highest quality. But we’re being asked to jump through hoops that often feel out of touch with farming reality.”

Many businesses were found to have been proactive in adjusting for the future, with almost all respondents already involved to some degree with practices to improve soil health, environmental conservation and hedgerow management.

Letty Glaister, head of agriculture at Tees, said the survey shined a spotlight on the challenges farmers face today and the solutions they’re pursuing.

“Whether it’s reshaping business models, embracing environmental practices, or planning for succession, it’s clear the sector is adapting,” she added.

Future for sector

Confidence remains an issue for the sector with just 13% of respondents optimistic about the future of the industry, and just 29% actively encouraging the next generation to go into farming.

As a result, roughly 60% of businesses were expecting a higher proportion of farm income to come from non-farming diversifications in the future.