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The Tenant Farmers Association (TFA) has once again called on the Chancellor Rachel Reeves, to reform rather than abolish Agricultural Property Relief (APR), warning that 'serious damage' will be caused if Ms Reeves takes a 'knee-jerk abolitionist approach' to APR.Ìý

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On Wednesday (October 30), the Chancellor will deliver the first Labour Government budget in 14 years.Ìý Over the four months, since the General Election, the TFA said she has been gearing the country up for 'a less than palatable menu of budget measures.' However, in her determination to be tough, the TFA has urged for her decisions 'not to be ill judged.'

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Tenant farmersÌý

TFA chief executive George Dunn said: "Rumours abound that the Chancellor may decide to abolish APR as part of the process of rebalancing the political scales by taking on the seemingly wealthy having been accused of raiding the wallets of pensioners with the previously announced changes to the winter fuel allowance. However, an ill-judged decision on APR could seriously damage the tenanted sector of agriculture, the most asset poor farming businesses in the country."

The TFA said if the architecture of Business Property Relief (BPR) remained largely intact, trading owner occupiers of farmland will continue to be able to pass down their land through the generations after death without fear of inheritance tax. However, the TFA said it believes landlords who cannot access BPR will find 'other tax havens for their assets including taking land back in hand', in an attempt to 'demonstrate they are trading in order to switch from APR to BPR.'

Inheritance TaxÌý

TFA warned this would 'kill off the tenanted sector of agriculture coming from privately owned estate land.'

Mr Dunn said: "We are already seeing, first hand, concerns about how Inheritance Tax charges change the way that traditional estates are thinking about the management of their agricultural land, and that is before there is any change to the Inheritance Tax regime. If APR was abolished this will make things hugely more difficult for farm tenants."Ìý

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TFA agreed APR required reform, but rather than abolishing it for let land, the TFA believed it should be available 'only to those landlords prepared to let for the longest tenancy terms (10 years or more) and all those already letting under secure tenancies regulated by the Agricultural Holdings Act 1986.'

EstatesÌý

At the same time, the TFA said 'we should be providing those landlords with the opportunity to deem the rental income received in respect of those secure tenancies as trading income, to assist with access to BPR across their wider estate interests', adding this would deliver a 'more sustainable agricultural tenancies and begin to reverse the trend of insecurity.

It said it would be beneficial if landlords had the opportunity to 'lock in their capital taxation position from the start of any agricultural tenancy for the full duration of the lease.'Ìý

But it also highlighted some exclusions would need to be introduced for land used for high-value crops, including horticulture, normally farmed in rotation.

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'Short-term restrictive tenancies'

Mr Dunn said: "Farming is a long-term endeavour requiring significant capital investment, patience, good soil management and the ability to balance profitable years against the bad. With 80% of all new agricultural tenancies let for five years or less, it is clear we need to nudge the market into providing a greater degree of long-term security.

"Short-term and restrictive tenancies are holding back progression, investment and sustainable land use.Ìý We can change this situation with reform of APR."

'Damage confidence'

Country Land and Business Association president Victoria Vyvyan said abolishing APR would 'seriously damage confidence in farming' including the tenanted sector.Ìý

Ms Vyvyan argued reforming APR would also 'increase uncertainty and instability' at a time when the Government should be 'looking to make letting of land more attractive,' whether it is shorter term for specialist cropping or for new entrants to find their feet in the industry, or for the longer term 'so that they can expand, invest and grow.'

"The CLA supports a vibrant tenanted sector. Ripping the rug from under farmers by scrapping or capping this vital relief will jeopardise the future of rural businesses and damage food security.

"To encourage growth and investment in agriculture the tax system should incentivise rather than be punitive," Ms Vyvyan said.Ìý