Wednesday, April 24, 2019

Farms are easy target for taxman

April 30, 2018 by  
Filed under Fen Tiger

Introducing an agricultural land tax would be tantamount to penalising food production. But Fen Tiger fears it could happen.

We all remember our birthdays and Christmas day – but now it seems that 6 April should be imprinted on the memory too.

The start of the tax year seldom brings any good news. Even when the chancellor scraps a proposed new tax hike, I usually discover I am worse off anyway because of yet another non-headline raid on my pension or savings account – or indeed any other necessity needed to run the family farm.

It makes me wonder whether a new land tax is in the pipeline. Of course, our blue government seems to like the landowners whereas the reds do not. But if Mr Gove can scrap direct payments, then I wouldn’t rule anything out.

I remember in 2014 when Scotland’s first minister Nicola Sturgeon announced plans to scrap tax exemptions for sporting estates. Her targets I believe were the rich and privileged who own large estates – the absentee landlords who only appear once a year for the annual shoot.

Stealth tax

But imagine a world where this land tax suddenly comes across the border and applies to all farms in England large or small. Some people believe that is what will happen – an attempt by the government to introduce an agricultural land tax by stealth.

Is my landholding a farm? Or is it a sporting estate? After all, I have been known to walk the dog with shotgun in tow. The trouble is that up north this tax is applied as business rates – so it is applied to the occupier not the landlord.

It’s true that smaller landowners may be charged but qualify for rate relief on a small business. But the rich often have other ideas or employ tax avoidance schemes to curtail the impact of new taxes. As usual, it is always seems to be the average family farm that suffers the most.

Just to press home the point, let’s imagine that an agricultural land tax is introduced – and a brown envelope drops through the farmhouse letter box demanding I pay £30,000 in business rates. For sake of argument, let’s call it the Corbyn Rate And Penalty (CRAP) scheme.

I am sure this tax would be popular with many members of the public who seem to think that farmers have lots of money. We seem to be an easy target for all kinds of policies introduced by people who think they know how we should run our businesses.

CRAP agency

Under the CRAP scheme, I would have to pay my £30,000 in business rates – but I would be allowed to appeal the payment by contacting my local valuation office who in turn would visit my farm in, say, six to eight weeks for an inspection.

After the assessment, it would then take another six to eight weeks for the CRAP agency – similar to the RPA – to notify me whether my appeal had been successful. I may then have a right to appeal again – and in the meantime I would still be out of pocket to the tune of £30,000.

During this time, it is likely I would have to extend the farm overdraft – at my own expense – and I am sure my bank would willingly oblige. Depending, of course, whether there is still a bank branch left in my local town and if I can find someone there who understands the farming world.

You may well ask how this £30,000 was calculated. Well, business rates are a tax on business properties. It could be argued that land falls under this heading so the open market rental value, known as the rateable value, would be based on the annual market rent.

Not so far-fetched

As a rough guess, I imagine that businesses pay half the value of their annual rent as rates. So 300 acres at £200/per acre means £60,000 rent. Half this is £30,000. Far fetched? Of course, exemptions may apply and I really hope I am talking nonsense. But I worry that it could happen.

Remember, today that farmers assume that any agricultural activity will qualify for exemption from business rates. But even a small change to a farm building can incur a charge. And any land with a double use could become liable for business rates.

It would be easy to administer too. Whether a pure tax on land, sporting estates or just land ownership, this sort of thing should be a concern for landowners and tenants alike. It would be effectively be a tax on food production.

Some economists believe it is wrong to distinguish between commercial property and agricultural land. In their eyes, they should both be treated the same. Let’s hope their wishes do not come true in the near or distant future – with or without a change in government.


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