FARMERS should review their Inheritance Tax (IHT) and succession plans ahead of the Spring Statement as potentially significant changes are expected, according to rural accountant Old Mill.
There are less than six months before the Spring Statement, and changes to the IHT format – based on recommendations originally outlined by the Office of Tax Simplification (OTS) in July 2019 – are likely. “The recommendations were primarily geared towards streamlining IHT administration but may have the secondary effect of reducing some of the favourable reliefs available to farmers,” explains Catherine Vickery, associate director at Old Mill.
“Current IHT legislation can be very beneficial for farmers, giving confidence that they can pass down agricultural business and property assets to the next generation tax free on death,” she adds. “Unfortunately, the coronavirus pandemic has left the Government with a very large debt, so there’s potential that it will implement any OTS recommendations to increase tax revenue.”
So, with the Spring Statement anticipated for March, what can farmers do to mitigate any potential changes?
“Under the existing rules, agricultural land and property qualify for Agricultural Property Relief (APR) from IHT at up to 100%,” explains Mrs Vickery. Other land and property assets, like diversified enterprises, can qualify for up to 100% Business Property Relief (BPR) as part of an overall farming business which is at least 50% trading. “These reliefs can apply on lifetime transfers as well as on death where the conditions are met.”
Transfers on death currently also qualify for Capital Gains Tax (CGT) free uplift so that gains are effectively washed out. Lifetime transfers of agricultural land, property, and businesses which are at least 80% trading qualify for gift holdover relief, meaning gains can be deferred until a later disposal.
However, a key OTS recommendation is to remove the CGT free uplift on death when IHT relief is also available. This would mean that the next generation would inherit the farm at an historically low base cost, leading to higher CGT on any future sale. The OTS has also just released its report into CGT simplification which echoes this same recommendation. Proposals to alter the trading test for BPR, aligning it to the 80% CGT trading test could leave farmers ineligible for 100% BPR, which could result in assets having to be sold to pay IHT liabilities.
“The most tax efficient option has often been for farmers to continue to actively farm and hold onto assets until they die,” says Mrs Vickery. “Now, given speculation about potential changes, the best course of action is to get a succession plan in place as soon as possible and start implementing it.
“Plans need to be arranged based on what is right for you, your family and the farm right now, rather than how things might stand at a later date.”
This means establishing who is taking on the assets and if they have the skills needed to drive the business forward. “Pass over this responsibility while you still can and while you can be on hand to guide and support your successor,” advises Mrs Vickery.
It’s also important to review partnership or shareholder agreements, and consider the handing on of other assets. Additionally, farmers should collate any trust and gift deeds, so that paperwork is on hand to be reviewed.
“Though we suspect the new IHT rules won’t be favourable, farmers need to make use of the rules we have now as these are a current certainty,” says Mrs Vickery. “Succession planning is so easy to put off but it’s a vital tool in safeguarding the future of farming businesses.”
Hemp: the old new supercrop
HEMP could become a more common feature of the countryside, our diets and everyday life, thanks to a new £1.1m research partnership.
The two-year project between Aberystwyth University and industry aims to make hemp a more valuable crop by increasing the amounts of compounds used to make a variety of food, health and pharmaceutical products.
Hemp is currently used in specialised fire-resistant fabrics, mattresses, building materials, insulation, animal bedding and biofuel.
An environmentally friendly, natural material, it is seen as a crop that can replace petrochemical products.
Hemp fibre has been used extensively throughout history, with production climaxing soon after being introduced to the New World. For centuries, items ranging from rope to fabrics, to industrial materials were made from hemp fibre.
Hemp was also commonly used to make sail canvas. The word “canvas” is derived from the word cannabis.
Pure hemp has a texture like linen.
Because of its versatility for use in a variety of products, today hemp is used in a number of consumer goods, including clothing, shoes, accessories, dog collars, and homewares. For clothing, in some instances, hemp is mixed with lyocell.
The new PHARMHEMP research partnership will develop the crop’s compounds sustainably; making them from parts of the plant that are currently left unused.
The research will also make the crop more valuable and allow use in more industrial and non-industrial sectors – making it more attractive to farmers who are keen to include alternative crops when rotating the use of their land.
Aberystwyth University’s involvement has benefited from the Welsh Government funded SMART Expertise programme.
Alan Gay, Senior Research Scientist at the Institute of Biological, Environmental and Rural Sciences (IBERS) at Aberystwyth University commented: “We’re delighted and excited about this new partnership. We will use our long-established expertise here in Aberystwyth to help spread the benefits of this crop to many more people.
“We also hope to contribute to improving awareness of the crop among both consumers and farmers.
“The project is also an economic boost: supporting highly skilled jobs in the west of Wales. As well as the cosmetic, food and pharmaceutical uses, we will also explore industrial applications, which would significantly reduce the need for expensive imports.”
Professor Iain Donnison, Head of the Institute of Biological Environmental and Rural Sciences at Aberystwyth University commented: “The Pharmahemp project builds on IBERS expertise in developing new opportunities for Welsh farming. It also represents an exciting opportunity for us to revisit and tailor a highly sustainable and versatile crop for the 21st century.”
The project links a number of the UK’s experienced operators in Hemp with the specialised breeding expertise of IBERS, Aberystwyth University.
The commercial partners are: TTS Pharma, specialists in pharmaceutical and health products; Voase and Son, specialist hemp growers; Elsoms Seeds, who develop and distribute seeds to the farming community; and GrowPura®, experts in controlled growing of plants where high levels of control are required.
Mark Tucker, Chief Executive at TTS Pharma, added: “This project builds on the foundations we laid in 2018 with Aberystwyth University, along with our other research projects.
“The resources and expertise at IBERS in Aberystwyth are particularly well suited to this research. They will help us to develop new cultivars, optimised for the UK climate and the end-use.
“We are delighted to have such strong partners to deliver the project’s objectives. We are confident that this project will contribute significantly to improving existing yields. It will also accelerate the introduction of a domestic supply chain and help eliminate the importation of illegal and non-compliant materials from China, South and North America.”
David Coop, Director of Elsoms Seeds Ltd, commented: “Elsoms Seeds is the UK’s leading independent seed specialist and plant breeder. We breed, supply, and treat high quality vegetable and agricultural seed throughout the UK, using the latest in plant breeding research and seed technology.
“We are looking forward to working with IBERS and our partners on this project, and one day providing UK farmers with high quality seed of the new and innovative varieties which will result from it.”
Nick Bateman of Growpura added: “In the pharmaceutical industry, the all-year-round production of materials under well-controlled conditions is important.
“With this project, we are keen to see how this plant can be adapted to growing in our high throughput sterile growing conditions, so that high quality products can be produced right throughout the year.”
Industrial Hemp Grower Nick Voase said: “We have been growing and processing industrial hemp since 2002 but have seen little development of the crop in the UK.
“We are happy to be involved in this project which will adapt the crop to new uses and is specifically aimed at optimising yields from UK grown crops.”
Despite a common misunderstanding, the industrial hemp strains grown in the UK are all varieties with negligible levels of the psychoactive substance THC and are selected from an ‘Approved List’ and only grown under Home Office licences.
NSA Lambing List closes
AS A much-valued service to its members, the National Sheep Association’s (NSA) Lambing List provides farmers with a place to advertise for much-needed lambing assistance from students and others seeking work experience each year.
The list annually provides an annual matchmaking service for around 400 farmers and veterinary and agriculture students. And despite a second lambing season under the constraints of Covid-19 restrictions the list has once again successfully helped farmers across the UK at this busy time of year.
The list has now closed and will reopen for advertisements for the 2021/2022 lambing season in the Autumn.
NSA Communications Officer Katie James says: “The popularity of the NSA Lambing List grows each year.
“The guidance it provides to farmers using it and the links it offers students means it is incredibly valued by all parties involved. For most, the past two lambing seasons have taken place during Covid-19 restrictions meaning potential shortages of staff due to travel constraints or illness from the virus itself and additional measures to consider such as separate accommodation for temporary staff and social distancing.
“All at NSA are therefore pleased that the list has been able to help remove some of these concerns and provide a trusted method of securing extra help for its sheep farming members.”
In a previous survey of NSA members using the list, more than 90% of respondents said they valued the list and would use it again to try and source additional lambing help from veterinary and agriculture students.
Students who will be looking for work experience to assist their application to university or as part of ongoing veterinary studies are encouraged to consult the list from November 2021 when it becomes available once again to aid the student/farmer matchmaking.
NSA members will be able to add details of their available placements for their next lambing season from October.
MPs urge level playing field
IN its new report—Seafood and Meat Exports to the EU—the Environment, Food and Rural Affairs (EFRA) Committee expresses urgent concerns for exporters of highly time-sensitive fresh and live seafood and meat shipments to the EU, particularly small and medium-sized businesses.
Despite overcoming initial “teething problems” the new barriers small seafood and meat export businesses face could render them unviable, and factories and jobs may relocate to the EU.
The Committee’s report, therefore, calls on the Government to ease burdens, including:
• as a matter of priority, seeking agreement with the EU on digitising the certification of paperwork such as Export Health Certificates
• taking a flexible approach to the compensation fund for seafood exporters—including reconsidering the cap of £100,000 on individual payments, and providing similar support to meat exporters
• providing the same help to small meat and seafood businesses with the costs of extra red tape for exports to the EU as they can receive for moving goods to Northern Ireland
• establishing a ring-fenced fund to help create new distribution hubs, which allow smaller consignments to be grouped into a single lorry load, so reducing transport costs.
The Committee criticises the fact that controls on EU seafood and meat imports will not commence until 1 October 2021, with checks at the border only commencing from 1 January 2022.
This has placed British businesses at a competitive disadvantage and reduced the incentive on the European Commission to negotiate measures that would lessen the burdens facing British producers.
The report finds that adhering to the revised timetable will be ‘crucial’, to ensure food safety and to create a regulatory level playing field.
Neil Parish MP, Chair of the EFRA Select Committee, said: “British businesses have acted with incredible agility and perseverance to adapt to the new processes for exporting meat and seafood to the EU.
“With the many checks causing delays and costs, this hasn’t been easy. We are concerned that in the absence of equivalent checks for imports from the EU to Great Britain, there will be serious long-term repercussions for our producers.
“As it stands, the playing field is not even, and the Government must ensure that the new timetable to introduce import checks is adhered to.
“Even as “teething problems” are sorted, serious barriers remain for British exporters, and it is now imperative that the Government take steps to reduce these.
“It must be pragmatic in seeking an agreement with the EU to reduce the red tape that harms both sides, and in the meantime, crack on with giving practical support to small British businesses to sell their produce abroad.
“By the end of the year, the Government must have developed a digital system for certifying EHCs for imports from the EU, enabling it to then negotiate a reciprocal arrangement.”
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