Report may bring FBT reforms in the autumn
Report may bring FBT reforms in the autumn
By James Garner
FARM Business Tenancies could face reform in the autumn if the findings of an independent government-backed report are acted on by DEFRA.
The report, conducted by the University of Plymouth on behalf of the government, concludes that more could be done to increase farm lets on an FBT basis, including a more favourable tax regime, adjustment to agri-environment schemes, and a relaxation of rules governing compensation payments for tenants that plough investment into their farm business.
But FBTs have been successful in getting more land on to the rental market. In total there has been an influx of 81,000ha (200,000 acres) of let land since their introduction in 1995, compared with a loss of 117,000ha (290,000 acres) in the five years before. But concerns still exist about whether they allow tenants to diversify or partake in agri-environment schemes in the same way as owner-occupiers.
DEFRA confirmed that discussions with industry stakeholders would be taking place on the Plymouth and Curry reports in tandem. Responses to recommendations made in both papers will form a policy for FBTs which would be included in the governments strategy document for agriculture, expected in the autumn.
George Dunn, chief executive of the Tenant Farmers Association, said the report vindicated the organisations position on tenancy agreements.
"It confirms that they are typically short in duration, small in area, and have high rents with restrictive user clauses." The average was less than 25ha (60 acres), with most bare-land terms lasting for two years, and three years for those that included buildings.
"They are more applicable to those who own their own farms and can spread rental payments over a large area. We want more flexible and open agreements," Mr Dunn added.
Oliver Harwood, head of rural economy for the Country Land & Business Association, agreed with the main thrust of the report, but warned against extra legislation that would interfere with the free play of the market.
"There is no reason why legislation should stand in the way of consenting adults. Tenants should be properly advised before entering into agreements. We must stress that these arrangements are a partnership. The financial return to the landlord does depend on the return to the tenant."
Tax breaks were one vehicle the TFA hoped the government would embrace to encourage more land on to the rental market and help tenants negotiate fairer and more secure tenancy agreements. Altering tax laws governing capital gains tax and inheritance tax for FBTs could persuade more landlords to use these agreements.
But the report warned: "We remain concerned that untargeted fiscal amendments could coincidentally encourage tax avoidance and that subsequent tax action by the Treasury to constrain such avoidance might produce greater disincentives to using FBTs than exist at present."
The report also highlighted that FBTs have brought little fresh blood into farming – only 9% of agreements in England were taken up by new entrants. But it said tenancy agreements alone would not encourage more people into the industry.
Mr Dunn argued that other targeted measures were needed to ease the path of those wanting a career in agriculture, including the provision of soft loans. *
George Dunn: TFA stance vindicated by reports findings on FBTs.
Oliver Harwood: No need for extra legislation to govern FBTs.