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ICAEW / CAAV annual dinner 2019

The annual dinner this year was hosted by the CAAV at the Farming Club on 16th April. Geoff Coster (President), David Brooks (Senior Vice President), Andrew Thomas (Junior Vice President) and Jeremy Moody (Secretary and Adviser) represented the CAAV, Aloysia Daros (chairman), David Missen (SME), Liz Peters and Will Nixey made up the team for the ICAEW Farming and Rural Business Community Group.

Over a delightful meal discussion covered a range of subjects again raising more questions than answers, a natural consequence of the uncertainties surrounding Brexit. The agenda for this year covered post Brexit farm economics and taxation, the definitions of Agriculture for income tax and IHT post Brexit, agricultural land prices post Brexit, Tenancy Disposal Issues, the new Structures and Buildings Allowance and current APR/BPR issues. Most of the discussion centred on Brexit.

Post Brexit Farm Economics and Taxation

The discussions here were wide ranging with several questions and observations raised including the following:

  • The average farm makes a loss before BPS / a section of farmers are propped up by BPS.
  • Will post Brexit subsidy regime be used to drive changes? 
    o Diversification 
    o Public good agenda
    o To get good farmers onto the land 
  • Does the Government consider food security to be a non-event?
  • Concerns voiced by farmers including the current supply of 35% of UK lambs to France and the elasticity of demand in France – will French consumers move onto something else. New markets would be needed perhaps in South America where lamb popularity is growing. What about increased food miles if export beyond Europe? Is Welsh lamb a premium product? What about a move to large farms supporting commercially run farm shops capturing a large customer base to reduce food miles?
  • How are farmers reacting to loss of BPS or possible tariffs? Are they mostly doing nothing?
  • What advice is coming out of Defra?
  • East Anglian farmers were observed to be over equipped and would there need to be more of a move towards sharing machinery?
  • Are farmers becoming more part time with increasing reliance on income from other sources?
  • Concerns over the inefficiency of some farms and questions over whether elderly farmers are more concerned about capital taxes leading to the crunch question ‘what is it that would prompt an elderly farmer to have his farm farmed by someone else. 
    o Is it money in the bank or tax relief’?
    o Should the Irish example be followed with longer leases encouraged with tax reliefs?
    o Should APR be tapered as farmers age?
  • Plans have been put on hold as a result of uncertainty surrounding Brexit.
  • Budgets are not prepared by many farms and those that are prepared tend to be produced for the bank but not followed. 
  • Lack of control by farmers over prices for their produce
  • Need to create new markets and move to producing premium products.
  • Who will want to farm in the future? Are there are still youngsters who are keen to farm.
  • What will CAP look like post Brexit? Europe have plans to reduce costs and this is before the loss of the UK contribution to the European Budget. It is difficult to see Europe agreeing an increased budget following our departure and there are divisions appearing between Germany and France.
  • Delinking of BPS from the requirement to farm. If a capital sum is paid to crystallise remaining BPS will this be taxed as capital (with ER) or as income? Will this be tied into a cross compliance penalty?

    Agricultural Land Prices Post-Brexit
    Land prices post budget will be driven by:
  • Required return 
  • Supply and demand; –
    o  Once land is taken out of agricultural use it is difficult to replace.
    o There is a shortage of land in parts of the UK such as East Anglia.
    o The Dyson effect. One view expressed was whether Dyson’s buying up of land in the south of England was ‘century planning’ – to bank fertile land in a wet island as a hedge against global warming - and not an inheritance tax planning exercise. 
    o Confidence in the market.
    o  It was noted that when we went into Europe land prices halved before doubling.

Liz Peters
Partner, Ballads LLP