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.”
A vision for Welsh upland farming
A NEW NFU Cymru report highlights the unique contribution that the Welsh upland farming community makes to food security, environment, the economy, rural communities and the Welsh language.
The NFU Cymru Vision for Welsh Upland Farming report, which was underpinned by a survey of over 750 farmers, was launched at the Vision for Welsh Upland Farming virtual conference on Tuesday, November 24.
The document reveals that 96% of farmers surveyed believed their role as food producers was very important or fairly important, with 95% saying that food production and sales were very important or fairly important to the viability of their business. 88% said it was very important that future Welsh agricultural policy should underpin food production and ensure consumers have a stable supply of affordable food.
The biggest worry for Welsh upland farmers to surface from the research was farm business profitability, with 85% of those questioned stating this was a ‘significant threat’ to the sector. The vast majority of those questioned (92%) said it was vital that future Welsh farming policy included measures that ensured farmers could make a reasonable living. However, just 18% of farmers answering the poll felt Welsh Government’s Sustainable Farming Scheme proposals to replace the CAP were very good or fairly good at specifically addressing the needs of upland farming, with 37% labelling the proposals fairly poor or very poor.
With the Brexit transition period coming to an end, 84% of farmers surveyed said that future trade deals were a significant threat to upland farming, while 80% stated that future policy was a significant threat.
NFU Cymru said the findings of this research work provide ‘another compelling argument’ as to why future Welsh agricultural policy should include a stability measure to help ensure the safe supply of food and as an economic foundation in rural communities, alongside the other multiple benefits provided by Welsh farming, amid changing trade and climate conditions.
The new NFU Cymru study also shined a light on Welsh upland farmers’ attitudes towards the environment. 80% of those surveyed had carried out one or more environmental actions on the farm in the last 10 years, while 83% said that future policy measures to tackle climate change were very important or fairly important. 54% of farmers surveyed were in Glastir agri-environment schemes and together had delivered more than 70 different environmental actions on Welsh farms.
The survey data further emphasises farmers’ role as drivers of the rural economy. 30% of farmers surveyed said their business supports or buys from 21 to 50 different businesses, with a further 10% stating that their business trades with or buys from more than 51 other businesses.
The important contribution of Welsh upland farming to rural communities and Welsh culture was also revealed. 83% of respondents were involved in one or more voluntary activities within their community, while over half of those answering the survey identified themselves as fluent Welsh speakers.
Diversification remains an important income stream for many Welsh farms; 43% of farmers responding to the survey stated that they had a non-farming element to their business. The most popular diversification enterprises were renewable energy (43%) and accommodation (42%).
Discussing the importance of NFU Cymru Vision for Welsh Upland Farming project, NFU Cymru LFA Board Chair Kath Whitrow said: “In recent years, despite their extent and significance, we have seen upland farming policy de-emphasised. As our relationship with the EU changes, the economic rationale for upland livestock production is threatened. Global environmental challenges, such as climate change and biodiversity decline, are viewed by some as drivers for land-use change without any consideration of the wider impacts.
“At this pivotal time for Welsh farming as we transition out of the CAP and into a new ‘made in Wales’ agricultural policy, the NFU Cymru LFA Board wants to ensure that the voice of Welsh upland farming is clearly heard in this debate. This is a message that has resonated strongly with Welsh upland farmers and, despite the limitations placed on us as a result of Covid-19, the voice of farmers across Wales has been clearly heard with our survey attracting a fantastic number of responses.”
NFU Cymru President John Davies said: “The Vision for Welsh Upland Farming report launched at today’s conference is one of the most comprehensive pieces of research work undertaken by NFU Cymru. Its findings are of strategic importance not just to the people living and working in the Welsh uplands, but to the whole of Wales.
“This research provides another compelling argument that future Welsh agricultural policy should include a stability measure to support farmers by protecting them against the increased volatility that affects businesses, trade and production. Such backing would ensure our farmers can continue providing safe, affordable food, as well as boosting the economy, enhancing the environment, caring for our cherished landscapes communities and being champions of Welsh language, culture and rural communities.
“I urge our policymakers in Cardiff Bay to carefully consider the report’s key recommendations and work with us to ensure that the people and communities of the Welsh uplands can continue to deliver for the whole of Wales.”
Potato production up despite tough year
THE TOTAL harvest of British potatoes this year will be 5.3m tonnes according to provisional estimates – up two point eight per cent (2.8%) on last year’s figure but just below the five-year average of 5.4m tonnes.
This estimate by the Agriculture and Horticulture Development Board (AHDB) has been released during a time when growers have battled an exceptionally wet harvest period for the second year running.
They have fared better than last year, as on 10 November it was estimated that two per cent of the planted area was yet to be lifted. This compares with 11 per cent of the crop that was estimated to be unlifted on 12 November 2019.
This production figure follows an AHDB estimate that the planted area this year is the third-lowest on record.
Alice Bailey, Senior Analyst at AHDB said: “This overall net yield sits in line with the five-year national average (2015-2019). Anecdotal reports suggest that yields have been somewhat variable from farm to farm, even field to field. Yet overall, crops are within farm expectations so it is not surprising that the national yield is in line with recent years.
“We saw planted area drop by two-point three per cent this year, yet we are estimating a two-point eight per cent rise in production. This is based on both a slight increase in yields year-on-year and the fact that a large area was left unharvested last year. The unlifted area in 2019 was estimated at six per cent, whereas in 2018 less than one per cent was estimated to be left in the ground and we would anticipate similar this year.”
It was also noted that the estimate could be amended in the coming weeks, with 2.1Kha still to harvest in the East of England, and some members of the 450 strong AHDB Grower Panel still to return their survey information.
WINTER MARKETING CAMPAIGN
Meanwhile, Potatoes Strategy Director Rob Clayton announced that AHDB would be launching another promotional campaign in reaction to the market conditions caused by the coronavirus. This follows on from a similar campaign in the summer that reached 5 million shoppers via catch-up TV, social media and display advertising.
“Since the pandemic hit we have increased the amount of data we analyse from supermarkets and other areas of the marketplace. While potato sales at retail are up eight to nine per cent overall – analysis from Kantar Worldpannel shows baking potatoes lagging behind at a rise of three per cent.
“Jacket potatoes are a fantastic healthy and cost-effective option for families, so we will be launching a winter campaign to inspire shoppers to take advantage of all the great things they can do with bakers,” said Doctor Clayton.
Eustice turns in a useless performance
GEORGE EUSTICE has all the qualifications to be DEFRA Secretary of State in the Westminster Government.
He owns a pair of green wellingtons, corduroy trousers, a smart tweed jacket and a wax jacket.
He must be very good at his job. He’s been a Minister in DEFRA for most of the last six years.
CAR CRASH INTERVIEW
Which makes his catastrophically ignorant performance on Sunday’s Andrew Marr programme all the more baffling.
After six years as a Government minister, four of which have come after the result of the 2016 Referendum and ten months of which have come after Boris Johnson ‘got Brexit done’, Mr Eustice appears to have little or no grasp of the realities of agricultural production and food processing.
His nonsensical remarks about sheep farming – which he has sought to clarity – have received a lot of attention.
Of equally worthy attention is how George Eustice regards the interaction between markets.
In Eustice World ™, tariffs will have no effect on the UK’s dairy industry because tariffs will also be applied to EU goods coming into the UK. Which would be an interesting take if in the last reported year the UK didn’t operate a surplus of dairy trade with the EU. In short, EU countries buy more of ours than we do of theirs.
No doubt the gap in exports will be taken up by exporting blue cheese to the notoriously lactose-intolerant population of Japan.
ARLA RESPOND WITH HUMOUR
As an illustration of the Eustice Doctrine the DEFRA Secretary claimed that if producers like Arla wanted to continue to trade in the UK, they would have to relocate their production of Lurpak to the UK.
Arla explained in a subsequent tweet, doubtless to George Eustice’s amazement after only six years in DEFRA, Lurpak is subject to legal origin protections. Those mean that Arla can only produce Lurpak® in Denmark with Danish milk. It can’t be produced in the UK.
Arla helpfully added: “Don’t panic, whatever happens with Brexit, we’re sure we’ll be able to find a way to keep Lurpak coming into the UK.”
Dairy production was only a small part of George Eustice’s monumental achievements during his interview.
He went on to anger sheep farmers with a crass assertion so wrong-headed that even his subsequent attempted gloss on his words rubbed salt into their wounds.
FEELING THE HEAT OVER SHEEP MEAT
Andrew Marr asked George Eustice about the effect on sheep farmers. In a no-deal Brexit, red meat exporters face tariff barriers to trade with their largest export market. Over 40% of sheep meat is exported to the EU and that accounts for 90% of all UK sheepmeat exports. The largest market for British sheep meat in the EU is France, which takes around half of all exports.
In the event of a no-deal Brexit, the tariffs on lamb exports would make UK production uncompetitive in the EU market. Worse, the prospect of a trade deal with New Zealand raises the dual prospect of imports carving UK farmersout of their home markets.
Mr Eustice blithely asserted that UK sheep farmers would face only short term price drops and farmers who farmed sheep and cattle together could diversify into beef as imports from Ireland and the EU would fall due to increased tariffs affecting imports to the UK.
He subsequently clarified: “In my comments on the Andrew Marr Show, I did not say that all sheep farmers should diversify into beef. I said that if tariffs were applied then some mixed beef and sheep enterprises might choose to diversify more into beef because Irish beef would become subject to tariffs, creating new opportunities for British producers.”
That is not what Mr Eustice said. He said mixed cattle and sheep farms could diversify.
Mr Eustice’s suggestion would only have force if he thought most sheep farmers farmed cattle. Otherwise, his answer on sheep tariffs would make no sense in context.
On the latter point, farming organisations expressed dismay and bemusement at Mr Eustice’s ignorance.
FARMERS RESPOND TO USELESS DISPLAY
Phil Stocker, CEO of the National Sheep said: “Mr Eustice’s comments will have angered many of our nation’s sheep farmers, failing to identify the unique and varied nature of sheep enterprises across the country.
“To begin with, to suggest that many of our sheep farmers are mixed farmers is wrong. This assumption will enrage sheep farmers across the UK who have structured their farms to focus on sheep, and it will particularly antagonise our devolved nations where the landscape includes more remote areas of countryside, especially suited to sheep, and where buildings, machinery and farminfrastructure simply would not suit a sudden switch to cattle farming.
“The fact we have many sheep farmers, especially younger farmers and new entrants to the sector who run their sheep on arable farms and on short term grass lets was completely ignored – simply switching to cattle would be impossible for them.
“I find it hard to think that George Eustice really believes what he said This interview leaves us thinking his comments could either be part of creating a ‘we don’t care’ attitude to bolster trade negotiations, or, and this would be highly concerning, it exposes an underlying willingness to see our sheep industry go through a restructure to reduce its size, scale and diversity.”
FUW President Glyn Roberts said: “The reality is that failure to reach a trade deal would have a catastrophic impact for our key agricultural sectors that would hit home very quickly, with the sheep industry likely to feel the impact most acutely.
“It would also cause untold disruption to food and other supply chains and complete anarchy at our ports.”
Mr Roberts said that such a failure would also have devastating impacts for EU businesses and that it was therefore in both the EU and UK’s interest to ‘pull out all the stops’ to reach a deal.
Mr Roberts also rebuffed claims by Prime Minister Boris Johnson that the UK ‘will prosper’ without an EU trade deal.
“You cannot cut yourself off from the worlds biggest economy and trading block in the height of a global pandemic, the worst recession for a century and having borrowed a quarter of a trillion to cope and think it’s going to go well.
“Not only would this amount to catastrophic self -harm from an economic point of view, but also at a practical level the country is woefully unprepared to cope with the flow of goods over our borders and all the paperwork and checks that this requires.”
Mr Roberts said that while EU ports facing the UK had undertaken significant changes to prepare for different Brexit scenarios, many UK ports were still in the early stages of planning new infrastructure and would not be prepared to cope with the movement of goods until at least July next year.
“Even if a deal is reached, we are facing significant additional costs and disruption as a result of non-tariff barriers due to the UK’s decision to leave the Single Market and customs union.
“A no-deal will severely escalate these and must be avoided at all costs,” he added.
NFU Cymru President John Davies said: “Ahead of the EU Referendum and ever since, NFU Cymru has been consistent in its messaging that a ‘No deal’ Brexit outcome, which would see the UK trading with the EU on WTO terms, would be a catastrophic position for Welsh farming. The reason for our strong position is that the EU market has been – and remains – the nearest, largest and most lucrative export market for many Welsh products. It is a marketplace where our customers recognise and value the Welsh brand and the high standards it represents.
“Only a year ago the industry was told that the odds of a ‘No deal’ Brexit were ‘a million to one against’ and there was an ‘oven-ready deal’, yet here we are only weeks before the end of the transition period, facing the prospect of ‘No deal’ and high tariffs on our exports.
“The comments made by Secretary of State George Eustice serve to further underline why it is so important to Welsh agriculture that UK Government agrees on a deal that secures access to the EU without tariff barriers and with minimal friction.
“The Secretary of State’s view that Welsh sheep farmers could diversify into beef production to offset the impact of a ‘non-negotiated outcome’ will be of major concern to our sheep farmers, who are some of the most efficient and innovative in the world producing a quality product. The reality is that changing production methods involves long-term production cycles and for many, the significant investment required makes it an unviable option.
“The Minister’s comments on the dairy sector are also concerning and do not account for the fact that we are net exporters of some dairy commodities and that the profitability of some domestic sectors, like liquid milk, is tied closely to the timely export of high-value co-products to the EU, like cream. The idea that many of the major EU dairy processors will have to relocate their operations to the UK is fraught with difficulties and is, in many cases, unviable.
“Being priced out of our nearest and most important export markets for even a short amount of time would have severe consequences for the food and farming sector in Wales.”
TFA National Chair Mark Coulman said: “To suggest that dairy farmers will be saved by forcing Arla to produce its popular Lurpak brand in the UK when it is legally bound to keep its production in Denmark and that dedicated and successful sheep farmers should consider diversifying into beef production, if export markets for our high-quality lamb become closed to us, were not helpful, to say the least. The farming community was hoping for much better than this.
“Somehow, we need to use the short time available to garner the strength to pull victory from the jaws of defeat. This will require a concerted effort with the Government and the farming industry working together to achieve that. Although late in the day, the TFA is committed to engaging in that work,” Mr Coulman concluded.
News2 weeks ago
£121k watersports funding announced for Llanelli beauty spot
News4 hours ago
Police appeal following incident outside Bryn Primary School
Farming2 weeks ago
Eustice turns in a useless performance
Uncategorised2 weeks ago
Self Assessment customers warned about scammers posing as HMRC
Education2 weeks ago
Welsh charities shortlisted for educational awards
Uncategorised2 weeks ago
BHF Cymru calls for stock donations before Christmas
Politics2 weeks ago
WG settles ‘scandalous’ land sale case
Cymraeg2 weeks ago
Nyrsys – angylion ac arwyr Covid-19