Re-introducing business rates could add £450m to farming’s tax burden

Farmers could face a collective tax bill of up to £450m if agricultural land and buildings become subject to business rates, as a new government report suggests, according to land agent Savills. 

The Lyons inquiry into local government funding, which reported this week, raises the possibility that business rates for farmland and buildings could be reintroduced, with only marginal land pegged for a complete exemption.

Lucian Cook, director of research at Savills, said that, if implemented, the move could add £300-£450m to farming’s tax burden.

“Whilst the report acknowledges the impact the re-introduction of tax would have on land values, and seems to rule it out in the short-term, it does raise the possibility of it being introduced progressively,” he said.

The report also differentiated between commercial farmers and lifestyle buyers, he added. “Because these lifestyle buyers want to enjoy the benefits of ownership without wishing to be involved in day-to-day farming, they have played an important part in making land available to progressive farmers who want to expand but do not want to see their capital tied up in land.”

The occupiers of the land would normally be liable to pay business rates, so this would equally apply to tenant farmers as well as owner-occupiers. “In some cases this tax, if introduced, would affect contract-farming agreements too.”

Coommenting on Sir Michael’s report David Fursdon, president of the Country Land and Business Association said:

“Sir Michael notes that the agricultural relief was introduced because of economic difficulties in the sector: we think those difficulties remain. Farming is already wholly dependant on subsidy, which it is government policy to remove. 

“As Sir Michael’s report makes clear, if the relief were withdrawn – and we note that he does not explicitly recommend doing so – it would result in farmers losing around a fifth of their current income.

“If the exemption is to be changed, it must be done sympathetically and with proper regard for the practical difficulties it will cause.  Profit margins in certain farming sectors – hill farming, suckler herds and small scale dairy herds for example – are very narrow and there is absolutely no point in imposing a tax burden on farmers that they will not be able to pay.”

The Lyons report also attracted criticism from Cotswolds MP Geoffrey Clifton Brown. Click here to read what he had to say.