The argument about farmers having to pay inheritance tax at half the normal rate on transfers of their property that they might make on death exceeding £2 million or more in value at that time is one that Labour does, most definitely, have to win.
I do not make the arguments that follow because I do not understand farming or life in an agricultural area. For well over half my life, I have lived within a few hundred metres, at most, of a farm, and I am well aware of the importance of farming in rural communities.
That said, I am also well aware that farmers like to play on ideas about the benevolence of their trade that should long ago have been eliminated from children's books, many of which seem to exist to perpetuate them.
Farming might be important, but despite whatever the farmer might wish to claim, the ability to farm is not eugenically passed from generation to generation. It is a learned skill like any other, and a wise parent really should not demand that their children follow in their footsteps. That's simply not good parenting.
Nor, as is very apparent from the degradation and straightforward industrialisation of a great deal of our countryside over the last 50 years or more, is all farming necessarily beneficial. A great deal is very obviously not of that type.
It also needs to be said, even if I am aware that I will upset some people by saying so, that some farm products are themselves unnecessary. As a matter of fact, we do over-consume meat at cost to the natural environment, the broader biosphere and our climate, for example.
To pretend, having taken all this into account, that there is some structure to farming that must survive intact and that it is necessary for the existing knowledge of farming to be passed down the family line for it to do so is quite absurd. If ever there was an industry that needs to be shaken up to ensure that it was transformed to meet the real needs of modern society, and the survival of humanity, then farming would come high on the list.
If any farmer reading this does not like that claim, they are welcome to provide a reasoned response that justifies a contrary view, but unless their argument embraces sustainability, economic logic, and an absence of eugenic claim, I suggest they do not waste their time.
With all this being noted, let me address some of the economic claims that are being made. The first is that if an inheritance tax charge is imposed on a farm once every generation, with the likely charge amounting to relatively few thousands of pounds a year when spread over that period in the case of most family farms in the UK, then those farms will cease to be viable. This is utterly absurd.
I know this as a matter of fact because large numbers of farms in the UK are managed by tenant farmers who lease their land. Despite that fact, they must make a profit because they continue to operate. In other words, it is actually the case that the separation of the ownership of land from the undertaking of farming activities is possible, and therefore, there is no economic good reason why the passing on of the value of the land used in farming tax-free is necessary. To claim otherwise is contradicted by straightforward economic fact.
If any farmer claims to the contrary i.e. that their farm could not survive if the land used in the production process was not provided rent-free, then the reality is that the problem is not with the inheritance tax charge but must be found elsewhere. So, secondly, that problem is either in the power that a very few large, multinationally owned food production companies have over the prices paid to farmers or in the price that retailers are willing to charge for food-based products in supermarkets, both of which price pressures are passed back by them into lower prices paid to farmers. This price pressure has, as a result, at least in the minds of those farmers, been deemed to mean that they cannot continue to undertake their activities and simultaneously cover the cost of using the land engaged in that process and pay a return on its use.
At one very obvious level, this does, then, suggest that it is the duty of the government to break up the monopsonist power of those food manufacturers and retailers to ensure that farmers are not prejudiced by their actions, as are all the rest of us. By protesting, what farmers are quite absurdly doing is demanding that those food companies and retailers continue to get the effective subsidy via the inheritance tax system that they now enjoy, and that is most definitely not a solution to any problem in the food sector right now.
Alternatively, farmers are pointing out the glaringly obvious fact that the land that they are using in their farming process has no economic value because it earns no return. Their claim in that case should be that all the profits generated by their efforts are due to their own labour, and not to the value of the underlying assets used in the farming process, and therefore, those assets should have no value when it comes to inheritance tax purposes.
The problem with that claim is that, of course, the market price of that land does not bear this out. There is an active market in farmland, and so the question has to be asked as to why that is true if what farmers are suggesting that no profit can be earned from its use is true. There are two options here. One is that the claim farmers are making is not true. The other is that the price being paid for farmland is solely motivated by the existence of generous inheritance tax relief, which relief has massively inflated the price of farmland.
If this second option is true, then farmers should welcome the imposition of this tax charge because what it should do is significantly reduce the value of their land. This has two obvious advantages for them.
If, as they claim, they have no desire to give up farming and would rather pass on their farms to the next generation, even though doing so would appear to be not only irrational but also utterly unfair because it would then require that next generation to work for little or no reward as they claim that they have done, then this collapse in the land price would make this entirely possible, and so they should be happy about that fact. Farmers should be grateful to Labour for creating this tax charge in that case. In fact, they should be asking for the tax rate to be increased because the higher it rises, the easier it will be for them to pass on their farm from one generation to the next without ever having to sell their land, which is what they claim they do not wish to do.
The other obvious advantage of this collapse in land prices is that if the price of farmland was forced down in this way, then it is highly likely that there would be more people who would actually wish to partake in farming because that is the way in which they wish to earn their living, which they are prevented from doing at present because the price of land is so high. This would then diversify and strengthen the farming community in ways that current land prices prevent. Again, farmers should welcome this with open arms.
Finally, if farmers can find no sense in any of these arguments, they have to ask themselves one quite straightforward question, which is why are they farming in that case? If they are using assets worth many millions of pounds to make no return, are they actually undertaking useful economic activity? I know that they think they do because they believe that they are producing food. I do not dispute this. What I am saying, however, is that if they believe that statement to be true but that it is not possible to make money as a result, then they should not be blaming the government for imposing a tax charge on the value of land, but should instead be asking the question as to who does make that return when it is obvious that there is a vast market for food in the UK, which must be exploiting them if they are not making money. Shouldn't they, in fact, be going to the government and saying. “Please help us make money?” rather than “Please stop taxing?” Aren't the farmers protesting, in other words, about exactly the wrong thing?
What they are asking for is the perpetuation of their exploitation when what they should be demanding is that the exploitation in question be ended and that they be provided with an opportunity to make a proper return on their efforts and on the assets that they employ, and yet that question has never seemed to be under discussion when this issue is mentioned, and that has to be wrong.
I repeat what I said: farming and all that goes with it has been a background to much of my life. My concern with food, a sound economy, national security, fair taxation, and the creation of an economy that does not exploit those who participate in it all suggest that there are serious problems in farming. But, all the evidence suggests that a great many of those problems arise because of the non-taxation of the value agricultural land, and the resulting exploitation that this has given rise to of the farming community, and the fact that same community is then being exploited as a result by the food industry to which they are suppliers.
It would really help if farmers would protest about the right things in that case and not about wanting to continue the very subsidies that have given rise to their exploitation and are not, in reality, enjoyed by the farmers themselves.
In summary, the farm community team needs to up its economic game because, at present, and using the arguments that they do, they have no chance of improving their lot, and I am very keen on them doing so. They're being exploited, as are the rest of us, and I want that to end.
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Richard,
End of para 7, Our Race, might I suggest a different term, possibly Humanity?
But as far as I can see the stats that indicate the scale of the problem is…….
Back in the late 40’s the average family spent 25% of its income on food and the farmer got about 50% of the retail price.
OK not really normal times but……….
Now its nearer 10% for both.
So in the 40’s a farmer had to produce about 8 families worth of food to earn an average wage after they had covered their costs now its about 100 families worth
S
Edited
Thanks
What you are suggesting rings true for me.
The taxation issue is old hat, a tired old trope – your points are good points – the tax issue is to farming what the obesity drug is to the sugar problem – a red herring, the wrong road.
Again it seems that among working people, farmers too have the wrong end of the stick – too lazy, too ready to be sheep blaming tax like the good Neo-liberals they have been brought up to be to notice what is really making their lives harder and poorer.
Sorry Richard you are conflating too many issues here. The questions of sustainability, economic exploitation and tax are separate. If someone inherits a small or modest farm and is useless at running it they will soon end up giving up farming. Where someone hands over a large estate and the son or daughter is either not interested or useless at farming they could employ a manager and carry on ‘farming’. I return to my solution which is to have limits on who can and how much land anyone can own – a far better solution. That would of course include the royal estates. We do not need people like James Dyson and Jeremy Clarkson portraying themselves as the voice of farming.
For your information I grew up on a farm and still own it! Its not very big and I know the problems farmers face.
I am happy with the idea of limiting land holdings but you can’t pretend the issues I talk about don’t exist – because they do
In the UK, can a full-time farmer make a profit and derive an income from a small holding farm?
In the USA, I would say that a small holding farm is anything under 500 acres?
They can
The average farm in Northetn Ireland is 100 acres and they are viable – albeit with lots of subsidies – or negative taxes, which are the the only type farmers like
The arguments you make are correct.
My sister and her husband were desperate to be farmers so, after working overseas for a while and borrowing heavily (a mortgage/from family) they bought a very small farm 30 plus years ago. He died recently. Over the years I have worked on the farm, looked at the finances of the farm and dealt with inheritance issues relating to the farm. In short, I have close up experience.
First, farming is a precarious existence; that he stayed afloat for 30 years, raised a family and eventually became debt free is a minor miracle. His biggest battles where monopolies; feed suppliers and product buyers. This is what farmers want tackled.
Second, although life is very hard, farmers do get “non-business benefits” from things that are charged to the business. One should take some of their pleading of poverty with a pinch of salt; my brother-in-law drove a 15 year old VW Golf but Jeremy Clarkson (and many farmers) drive range Rovers…. and I wonder who pays?
Third, they have three sons. All three saw how tough farming is and have pursued careers elsewhere; my sister will probably sell the farm. This will provide opportunity for a new generation to farm… although the land will almost certainly be snapped up by existing neighbouring farms. Selling will be heart-wrenching but watching a son working the farm out of a sense of obligation would be worse, she says.
Fourth, obviously, IHT is not an issue as my sister inherits tax free… but when she dies it will not be an issue under new legislation. Her farm is just too small.
In conclusion, farming life is hard, we should try and help them…. but IHT, with a 10 year period to pay, should be at the same rates as everyone else.
PS Forgive the request for anonymity but lots of personal detail here.
Thanks
Appreciated
“Jeremy Clarkson (and many farmers) drive range Rovers…. and I wonder who pays?”
Amazon in Jeremy Clarkson’s case???
Clarkson’s Farm, the TV show, is not the whole picture but it definitely a piece of the picture.
My point was that, although a car is a legitimate business expense and tax deductible – does it have to be a Range Rover?
No….
“If ever there was an industry that needs to be shaken up to ensure that it was transformed to meet the real needs of modern society, and the survival of humanity, then farming would come high on the list.”
This is true but you could easily end up with a Farming Industrial Complex as we have in the USA. From all I have read, the English do not want a US style Farming Industrial Complex nor the English want the products such that said Farming Industrial Complex produces.
What I am suggesting is the way to prevent that farming industrial complex – because without new entrants into this industry, which can only happen if land prices fall, that is what we will get.
Thank you, Richard and commenters.
With regard to the availability of land, I have come across some British families / couples in France who wanted to farm in the UK, but could not find or were not able to buy or rent something suitable, so migrated to France (before Brexit) and either bought or lease from the local authority (perhaps with the aim of buying their own in due course). I’m told there are elsewhere in the Mediterranean basin. These are not hobby farmers, although they do exist. The farmers have explained the issues Richard and others have written.
Thanks
Although your points are logical, your position appears to be verging towards ‘Utopianist’, by which I mean that it assumes that a perfect order will emerge when a perfect set of principles are applied, perfectly. But that never happens.
Do we really want the farming industry to become just another industry that is subject to the demands of, say, private equity companies? Or large agri businesses? Because that is a risk. I suggest that a good defence against that is the fact that many farming families do have a connection with the area that they farm, and however much their farming practices may need to change they are more likely to change than very large vested interests. (And I don’t think that farming counts as quite the same vested interest that it did when the NFU was represented by reliable numbers of shire Tories.)
The farming industry, like, say, the building industry, is not short of people who are very interested in new techniques, ideas, and so on. But the dominance of malign forces is the problem. And we would all benefit if these industries were not so adversely affected by them.
So the incremental changes in land use that are required do not depend upon the abandonment of farmers’ association with their land (that is neither a necessary nor a sufficient condition) , but rather this association can be usefully employed in pursuit of beneficial changes, and as a defence against adverse changes.
I agree that we would all benefit if farmers saw the problem as their own profitability, rather than IHT. But be careful about dismissing longstanding associations with the land.
I am not being nutopian – but farmers are. Tha claim that prices of land will not change as a result of this charge – just made to me by the President of the NFU in Notyjhern Ireland on the BBC – is absurd. Of coruse it will. The demand for land will fall – and if only inheritance tax was at 40% would fall further – and that would be transformative – in the right direction. Wjat I am suggesting is what would make family farms possible – the exacxt opposite of what you are clainming. Why make up false claims?
Richard,
I’ve heard concern that commercial investors (such as domestic and overseas private equity funds as mentioned elsewhere), for whom IHT is not an issue, will lap up any cheaper land that is put on the market as a result of these changes (e.g. through buying companies who own farmland as assets). The argument goes this would offset any economically desirable decrease to land values; instead of a greater equity in land ownership, we’d essentially see land change hands from one aristocrat to another.
Are these concerns fair? Are Land Registries in England&Wales and Scotland, or other bodies, capable of preventing this? I note that hard data on the foreign ownership of farmland in the UK to be seemingly non-existent.
Stuart Maggs has been very good on this subject, he is on Twitter/X.
Also @SwaledaleMutton, he is a farmer and also a virologist.
Well worth engaging.
Hi,
Figure 6.1 here (https://www.gov.uk/government/statistics/balance-sheet-analysis-and-farming-performance-england/balance-sheet-analysis-and-farming-performance-england-202223-statistics-notice#return-on-capital-employed) shows Median Capital Employed for farms is £1.6m. This means an IHT burden of £120k (20% of £0.6m), to be paid over 10 years, so £12k/year. The same chart shows Median earnings (before interest and tax) as £9k.
Farming is fundamentally different to other businesses: the return on capital is tiny, comparatively. A farmer sitting on land valued at £2m is not necessarily wealthy.
Actually this implies no IHT charge – because the £1 million is on top of the £1 million most families can already get tax free. So, there is no issue for most farmers
OK great no issue for most farmers, maybe my median example wasn’t good. But the fact remains that rates of Return on Capital Employed just don’t support the tax payments required in many cases – because, as I say, farming is fundamentally different.
If we imagine a farm with twice the Median Capital Employed (so £3.2m) and assume that, through economies of scale they manage to achieve three times the Median earnings (before tax and interest) (so £27k). They would be faced with paying off £24k / year with only £27k in earnings.
According to these figures, just 20% of farms manage to hit 5% Return on Capital Employed and Figure 6.4 shows the highest rates (including land values) come from dairy farming, which environmentalists have concerns about. So the people squeezed the most are those employed in “greener” farming.
People sneer at Jeremy Clarkson and he’s certainly nothing like a representative farmer, but if nothing else, his show emphasises how tremendously difficult it is for farmers to turn a profit and that the market value of the land doesn’t really reflect wealth.
Do you really believe farm median earnings are £9k? Pull the other one.
If they are any farmer wishing to pass the farm on is guilty of child cruelty.
As things stand, qualifying agricultural property and qualifying business property each get a 100% exemption. Some other so-called “business” assets only qualify for 50% BPR.
This is on top of the nil rate band, currently £325,000, and the residential nil rate band, currently £175,000. By and large that means a married couple can pass on £1m tax free between them.
In future, each person can qualify for the £1m APR/BPR exemption, so that is a farm worth £3m passing on inheritance tax free to the next generation, if structured properly. And only 20% on any excess. Unlike someone with a £3m+ house or car collection or whatever else whose estate (on the death of the second spouse) would bear 40% tax on value over £1m.
With a little bit of planning, the family farm can be held through a family partnership or a company, with interests passed on to the children or grandchildren during the lifetime of the (grand)parents as potentially exempt transfers, with taper relief after three years and exempt from tax on death after seven years.
Sure, some aged farmers expecting exemption forever may be caught out with the law changing. But the 100% agricultural exemption was only created in 1992. It is not a god given right or an original feature of inheritance tax. And the UK has a farming industry before 1992. Perhaps it would be better to return to times when agricultural land was not so sought after by financial investors due to its nil tax status on death.
Agreed
As I will note in a coming blog, I had to point all this out on BBC Northern Ireland. The farming reps claimed the limit was £1m. There is a lot of nonsense being said.
Farming is different from other industries but one key difference is that land (the major asset) does not depreciate – it is a store of wealth. The current inheritance exemptions have damaged the sector by inflating land prices and encouraging ownership simply for inheritance tax advantages.
Guy Watson-Singh (Riverford veg box’s) pointed out that he has land in the Vendee in France as well as the UK and the price is significantly lower.
One obvious difference is that there are restrictions on who can own agricultural land which would have ruled out a lot of the ‘Inheritance Tax farmers’
So perhaps France shows the way to go
Richard
Since you asked for a contrary view, I am just sharing what I came across from one of your adversaries.
https://www.linkedin.com/posts/james-quarmby-24327411_the-wonky-world-of-farm-economics-most-activity-7264195367167045632-etNT?utm_source=share&utm_medium=member_desktop
THE WONKY WORLD OF FARM ECONOMICS
Most people know nothing about economics of farming – having only stepped on a farm perhaps to use a footpath. Most voters live in metropolitan areas, as do their MPs.
Nearly 50% of farms make under £25k p.a. and about 1/3 of those make no money at all. In order to make a decent living you need scale – all the profitable farms are big. The average size of a farm in the UK is 217 acres, but the generally accepted minimum threshold for viability is 500 acres.
The problem is that, with values at about £10k to £11k per acre, that means your just-about-viable farm will be worth at least £5m. Without planning (which is not always possible) this means an IHT liability of £4m x 20%, that is £800k. Bear in mind that a 500 acre farm will only make £50k to £90k p.a., you can see that such a huge liability would be impossible to finance without selling land. However, if you sell land then you make your farm unviable.
Incidentally, the average farm (not farmer) makes about £96k p.a. Your average farmer takes a salary of about £25k p.a., way less than half the average train driver’s pay. These people are not rich – they work hard for very little reward.
It seems that metropolitan policy makers have in their mind a privileged elite of farmers, but the IHT policy will end up hurting the average, hard working and hard-up, farming community.
I think the letter in the FT from Paul Chesire Emeritus Professor of Economic Geography, London School of Economics, deals with Mr Quarmby’s comments very well
https://www.ft.com/content/ab358521-8d7e-424a-92c7-349155b08e79
Letter: Farmers’ tax break merely pushed up UK land prices
From Paul Cheshire, Emeritus Professor of Economic Geography, London School of Economics, London N7, UK
NOVEMBER 7 2024
Far from “protecting the family farm”, as claimed by Tom Bradshaw, president of the National Farmers’ Union (Opinion, FT.com, November 5), the inheritance tax loophole on farmland, introduced in 1984, simply pushed up the price of land without improving returns to active farmers.
This is because, like most agricultural subsidies, the value of the relief was capitalised into land values. As tax planners cottoned on to its role as a licence to avoid IHT, they advised their super-rich clients to buy land and take advantage of it. In the 20 years to 2012, the price of farmland increased fourfold.
This turned landowning farmers into millionaires but — especially since land represents a cost of production — did no good to the incomes of food producers. It created impoverished millionaires who claimed a need for more support. At the same time, because more expensive land had to be squeezed even harder for the last drop of revenue, the environmental damage caused by intensive agriculture was made worse. Taking at least some of this tax loophole away will do no harm to family farmers but will help both public revenues and the environment.
Just a shame the relief was not wholly abolished.
Paul Cheshire
Emeritus Professor of Economic Geography
London School of Economics, London N7, UK
I agree with Paul Cheshire
I have debated with James Quarmby. His economic knowledge ranks alongisde that of Winnie the Pooh.
I think you underestimate Winnie The Pooh
Sorry….
I said I was looking forward to this blog post. It did not disappoint!
I find your economic arguments compelling and the arguments about land values the most compelling – why else have the rich invested in farms? (James Dyson?)
Interesting that no one is providing well sourced verifiable accurate economic counter arguments, and that NFU/NI are using dud figures about the proposals. That can’t be because they are ignorant, so I will suspect another reason, and assume “scaremongering”.
I spent 15 yrs in the sector, the thing I learned was how diverse it is, in every respect. But it was distressing to see how pressures from outside, gradually forced the industry into less sustainable practices, from an environmental and welfare aspect. That HAS to change.
The fuss about this proposal sounds very like the gross misinformation put about in earlier elections about IHT in general, making an argument that falsely implied a large % of people would be affected, when the contrary was true.
There is more on this tomorrow…..
I’m not sure I agree, on this “dedication to producing food”.
When I was working for 15yrs in agriculture (pre 1991) I was struck by how the colour of the fields could change so rapidly depending on whether the EU was subsidising rapeseed (yellow) or lucerne (blue) or barley or wheat. And of course the demands of the gamekeeper for winter pheasant cover were also far more important in deciding what the cows ate, than the advice of the nutritionist or vet, hence fields of kale.
I was also horrified to see what got fed to cows to increase milk production, again, responding to subsidy changes, & milk quotas.
To deal with what some are saying about heartlessness of the tax proposals, I used to volunteer to do phone counselling for farmers during the FMD outbreak, so I know a bit about farm suicide and why its so high. But the people most at risk are exactly those who won’t be paying these IHTs, and the causes of their suffering are not these modest proposals. I didnt talk to any Farages or Clarksons when doing the FMD phone banking.
I think small farmers are amazing people, but I don’t equate them with those protesting about these wealth taxes. A lot of things have adversely affected our food security and food producing farmers, but IHT isn’t one of them.
Agreed, and thanks
I think is totally wrong that farmers have in the past been able to pay no tax when they die no child has. The write to be come multitask millions over night I have assets over a million I know the law says I have to pay tax on this why should I not have to I will live with in the law I think my children are still fortune they will receive this amount they do not have almity to have this why do farmers think their future generations have they will always been rich families let their children make there own way not at the cost to every person in this country.
As a grower of crops, and fourth generation, all I can say is that the cash to pay the IHT just isn’t there. In the last 40/45 years of our business, we can say that we have consistently earned below average income. We survive. Farms in the UK have been government subsidised to maintain dirt cheap food in the shops. Over the last 10 years our share of the money to pay our costs is between 35 and 40 % of the shop shelf price. The gross price average of our raspberries is 30% lower now compared to 1998. Our supermarket masters say we should be more efficient. I’m 69 now and most of my life have worked between 100 to 120 hours a week depending on whether we were harvesting or not. Our business has been valued at a ridiculous price. Lots of asset value, little cash which is not enough to pay the potential IHT bill. Also the return is insufficient to borrow the money from the bank to pay the IHT. If farms became more profitable if perhaps people paid a realistic price for their food? Wishful thinking.
How about a complete U turn? No IHT for anyone? Sweden did this a couple of years ago and immediately their revenue took more money overall because people didn’t hide their money anymore. Here in the UK the big problem is there is a palpable jealousy in the population, an actual hatred of people who are perceived to maybe “better off”. Well when I was working my 120 hour weeks I was quite happy but not better off than most. In fact many a year the Eastern European fruit pickers earned more than the family members. In 2019 our four family partners earned 100 pounds a month each. Anyone like to swap?
Ted
I have read some really absurd comments on here in my time, but yours really does rank right up there.
Let me be entirely clear as to why I say that.
No one asked you to be a farmer. No one required that you stay in the job. No one required that you impose hardship on your family to maintain your farm. All of that was done by your own choice. So, if you decided to run a failing business for 50 years, dedicating all your life to a task that provided you with no reward, and only a reason to gripe, then that was exactly what you wanted to do.
Given that you obviously presume that you will have an inheritance tax charge as a result of Labour changes, let me presume that your farm is worth more than £3 million, and might even be worth £5 million, or there would be little real reason why you are getting so upset about things.
You could, of course, at this moment sell your farm. You would, of course, have a capital gains tax bill that might come, if the farm is worth £5 million, to maybe £1 million, leaving you a clear £4 million in the bank. You could then put that in a bank deposit account and make at least 4%, and then have an income of at least £160,000 a year in your retirement, which is vastly more than the income that most people will enjoy in their lifetimes.
You are, therefore, an exceedingly rich man who chooses to produce food at a substantial loss for reasons that are hard to explain and then wishes to complain about the taxation of wealth precisely because he is by any reasonable standards a very wealthy person.
What is more, your claim that there is no money to pay the inheritance tax when in fact if you were to die and leave the farm to your children the inheritance tax bill would be no more than £400,000, leaving them a net value of £4.6 million on the basis that I have estimated, and an annual income to share of in excess of £180,000 a year.
Your claims that there is no money to pay this bill is, straightforwardly and very obviously wrong. In fact, it is worse than that. It is bogus.
And please don’t tell me that you could not possibly sell. It is obvious that very many farmers are actually doing so, or the farms of the type that have been created by James Dyson would not exist.
Very politely, I suggest that you stop moaning, count your good fortune, sell up, leave someone else to worry about why your farm cannot make money, enjoy your retiremnt, and give your children a share of your quite remarkable wealth.
Richard
PS And the argument holds even if your farm is only worrth £2 million or so, given what you are telling me.
Quite right. Who needs farms anyway, it’s not like they provide anything useful
Weirdly, there is a big market for farmland. Oddly, that is because people want to buy it to farm. If any farmer wants to sell up they will find a willing buyer at a very good price. Farming will not fail then.
What is it about that which you do not understand? And if you don’t, might I suggest you were never cut out to be in business anyway, but were perghaps well-suited to living off unearned wealth, which is what you could do instead?
Thank you Richard for your enlightening article. I can now see why multi-millionaire Jeremy Clarkson has chosen farming as a venture late in life. It all makes sense now. And doubly so for Richard Dyson.
This post actually clears up a little unease I felt about farmers who really do run family farms and are going to be caught hard by the first round of IHT. While I follow your line of reasoning that land prices will fall when IHT is brought into farming I felt sorry for the genuine farmers who were going to have to pay very high taxes on their land because the land would be valued highly at the minute. But there is a loophole that you’ve just highlighted. The farmers are perfectly at liberty to sell off their land to lower their tax burden.
So they could sell off the land for the first year, wait for the prices of farm land to fall and then buy it back with far less concerns about IHT in the future. And in the meantime, the farm industry would have been purged of all the tax-dodging financial leech types that just see it as a great way to avoid paying tax on a valuable asset.
And then with the drop in the price of land, real farmers get all the benefits you outlined. Now it makes me suspicious that the mainstream media narrative is being driven by the rich tax dodgers and the farmers are just a useful vehicle to get the government to change course.
Much to agree with
Thanks for your observations. I think Richard that you might be missing the point that all farmers are getting across, that they are devoted to their farms and the act of producing food for people. The asset value is irrelevant as they don’t want to sell and sit in the sun with their feet up. You do seem rather self assured you are the only authority on the subject. Family farms tend to continue on generation after generation. If a farm is sold at retirement and the next generation wants to start, how is that possible. Even if this new scenario does drive down land values, it’s still impossible for a young graduate out of agricultural college to go out and purchase enough land to make a viable farm. Richard, it would be helpful if you could go out there and start from scratch and build a sound farming business and then write the manual for others to follow. I suspect you would fail. You are obviously bright enough but to start from nothing is pretty much impossible. We see nice stories on Countryfile of youngsters working a tiny rented plot but multiples of that will never feed a nation. Back to your extensive reply to me, you’re right in that I am not poor. But I can tell you that out of approximately 50 cousins of mine who all tried to succeed in horticultural operations like mine, I’m one of about 4 left standing. I am quite proud of the fact that I don’t receive any of the various subsidies most farms avail themselves of. But do try to run a farm for a decade Richard. One of my cousins committed suicide when he failed to keep his family operation going. The shame of failure was too much for him. That is how attached farming folk get to the land. I appreciate that for you it’s all pounds shilling and pence and many of your respondents begrudge someone driving a crappy Range Rover. Perhaps you begrudge us wearing shoes as well? No offence intended and instead of buying you a coffee I’d be happy to have a coffee with you face to face and continue the chat. Last thing, not all family farms are the same, there are some successful ones but the vast majority just manage to keep it alive. But you know that of course.
I know that some very wealthy people want to maintain their lifetsyle choices.
Your attitude of “If you don’t like it, then just sell” seems a little arrogant. From what I recall, many farmers can’t really re-train so easily into other fields and if they were forced to sell and live off their land wealth it’d just increase the number of farms owned by big businesses and retailers.
Is the idea that many farmers are land rich but not profit rich wrong? I always thought the issue is the amount of financial loss parasitised as the profits from crops move up to the retailers and advertisers. I think if you haven’t already, it’d be a good idea to speak with agricultural researchers at the University of Sheffield. They work closely with agriculture, while presumably you are specialised in the economics of agriculture. I’m sure as an academic you’ve covered more bases than I realise, but merely growing up near a farm definitely doesn’t give you any relevance in understanding farming life.
I’m no economist, and only work adjacent to agriculture, but would a middle ground of farming IHT going back to the industry (preferably to the smaller farms which need it – definitely not to the land barons and aristocrats) make sense? My gut reaction is to sympathise with farmers, but it seems a multi-faceted issue that can easily be spun in deceptive ways.
None of that makes sense
Anyone in Sheffield should recall the sympathy for the miners and their retraining, and they did not have assets worth millions to sell to keep them in comfort without working for the rest of their lives.
What is the sympathy for?
[…] am aware I touched on the issue of inheritance tax on farms yesterday, but I felt it was worth another go. There is a lot of additional analysis in this post, so I hope […]
[…] farmers need to read the article that I wrote here yesterday or watch the video that I have posted here today. I made many of the points in both of those on […]
1. Farms provide essential products.
2. Farms use high value assets to provide those products.
3. Farms produce profits which are disproportionately small in relation to those assets, when compared to pretty much any other industry.
4. The new IHT rules means a non-negligible number of farmers will have to find tens of thousands extra per year and a sizable portion of those simply don’t have it.
5. Telling farmers to sell up and live off their wealth doesn’t put food on my table, or yours.
I don’t have an agenda here: I’m not a farmer, nor do I know any. I’m not a political activist; I’m not anti-Labour. I’ve provided independent ONS data. I acknowledge that being independent doesn’t mean it’s reliable but you haven’t provided any better data. Instead you’ve countered by trying to ridicule me rather than engaging with the points I’ve made. I’d never heard of Tax Research UK before stumbling across this page but it’s clear that while I came to engage with no agenda, the same isn’t true of you.
If you want to stop Clarkson/Dyson etc. from using farmland as a tax dodge then find a way which doesn’t hit people who are putting food on our tables.
No farmer is required to farm
There are willing buyers for their land
No one is suggesting for a minute that farms will not keep producing – because that is what the buyers will do with them
Your arguments are complete nonsese then – and would only make sense of the land was worthless to reflect the fact no one wanted it
Your ability with logic is incredibly low
And I have provided an answer that hits the likes of Dyson and Clarkson and protects small farms very precisely, as you demand – it is a higher inheritance tax charge
The trouble is farmers will hate that – they love thinking they are rich
You are backing a buch of hypocrites
The logic of higher inheritance tax putting downward pressure on farmland value thereby leading to a lower total inheritance paid by heirs and an easy continuation of the practice …. while plausible … requires way too many leaps of faith for a person (farmer, whoever) to naturally bank on.
What I reckon farmers really want is quite simply – no inheritance tax, period. Heck, it’s what anybody wants, farming or not. Most people have little interest in economic theories about how tax policies might affect asset values. What they want is the simplest, most direct solution: low to no [inheritance] tax. I don’t mean to discredit your writing.
The arguments of continuing tradition and feeding the world I think are used to tug at public and policymaker sympathies; they are not the primary driver. The essence remains economic self-interest: keeping wealth in the family and minimizing obligations to the government. You cannot remove this self-interest with logic. You remove it by vastly shrinking government intrusion in peoples’ lives.
What you mean is that very greedy people who hate society want to keep their wealth and all the benefits that flow from it without paying any tax at all. That is what this is all about. Watching farmers talking on the protest that is clearly what they are saying.
Dear Richard, this has made me dig a little bit. Dyson gets a few mentions and you commented he purchased from farmers selling up. Turns out he purchased a vast acreage off The Crown Estates plus other non family farms.
I admire your tenacity so in that light, would you be prepared to tackle the tricky issue of the Royal family not paying IHT on anything at all?
I have
I made television programmes on it a decade or so ago
Firstly, thanks Richard for the article and debate responses and everyone for the comments.
Picking up on most recent comment regarding farmers selling and then land not being farmed any longer ; Is there a danger the land will be put to other use such as solar farms, woodland, horticulture or rewilding. Is this a good thing for society?
Perhaps if some land was sold then we could reduce huge grazing and animal feed pressure on our land use and we could grow more direct consumed food and increase our independence whilst enriching the landscape?
You ask good questions
In many part of the country we don’t need farms. Welsh and other hill farms that are massively degrading the county with unnecessary sheep are cases in point.
But will farms be sold for random purposes? No. Planning laws are not going to disappear even if they change. The claim we will not / cannot feed ourselves because if this is yet more NFU / Clarkson nonsense. All we might – hopefully – see if land prices fall, and existing farmers hate that idea to keep out competition – the usual business conspiracy.
Having to post Anon as I will incur the wrath of my daughter who farms ( and has no chance of ever owning a farm) and the many farmer friends we have. In our area the majority of farmers we know educated their children privately, buy brand new machinery at a cost of hundreds of thousands of pounds, drive new and expensive cars (yes, mostly land rovers and their ilk), have multiple holidays a year, but some moan about paying their self employed workers £15 an hour. A farmer we know has diversified (as he is able due to having land) and rents out units and a conservative guess is he’s receiving £10 – 15k a month in rent and he’s not the only one we know. Admittedly he’s had to invest in prefab buildings. I do think some smaller farmers will be affected but I find the hypocrisy of Dyson and Clarkson unbelievable. Your comments regarding the exploitation of farmers is spot on – the large supermarkets drive down their suppliers’ charges while increasing them to us, the consumers while making millions in profits.
Thanks
Sainsbury’s boasts of working with about 100 British farmers. I forget the exact number.
Meanwhile around nine supermarkets control 95% of UK retail food sales. Logically, for equal bargaining power relative to the producers, don’t these giant supermarkets need to be broken up into about 900 separate units?
900 may be too many
Breaking the supermarkets up would be good news
I am not a farmer, nor an estate owner but know a lot about the agriculture industry, farming and farmers. I regard your blog as naïve and uniformed dealing in broad murky concepts. Perhaps more particularly given todays events I note you have not mentioned the NHS.
Not a single argument
I conclude you are a troll
Apologies for ignorance, but can someone please explain why farmers don’t form companies, so their farmland becomes a business asset to pass onto their children as directors without the need for inheritance tax?
IHT can apply to passing on shares
By and large it increases the cost
Hi, I’m not well informed on business or agriculture, I’m just a curious nobody, but I have read through every comment.
So far, I can’t piece together how family farmers or small farms are even affected by IHT. Only large farms with no or little heritage seem to be targeted, especially when I consider that generational farmers can gift the land and assets tax-free as long as they live for seven years after the fact. Have I mistaken this? Is that wrong? Can someone help me understand why generational farmers are upset about this new labour policy? I’m from Cornwall, so naturally I’m very interested in this debate, and with many farms right on my doorstep I may even ask around and try to get some first-hand understanding… But within this blog, the arguments made here, in my opinion, may be a tad bit heartless but are at least compelling and seem to add up. This whole thing has me thinking that the media is blowing this up, for whatever reason…
Your understanding is correct
Your last observation is most relevant
A glance at the turnout for yesterday’s demo tells me a lot. Farage got out his (spotless) Barbour & green wellies (but didnt talk about Brexit). Clarkson led the charge (is he well enough to go on demos?). Victoria Atkins draped herself in the flag. Kemi was getting good exposure. I suspect all the real farmers (under the threshold) were at home working on their farms. This was the Countryside/Taxpayers Alliance, plus Reform and the celebrity tax avoiding millionaires, once again squealing poverty.
Surely the limit will be £1 million before tax, not 2?
It is £1 million generally available to couples plus £1 million to each partner so £3 million + lifetime transfers which might be very much higher
Thanks for your earlier response, I can’t seem to reply so I’m posting a new comment.
My sympathy for farmers is them being forced out of their livelihood, and the concern that they will just be replaced by farming monopolies who can sustain themselves on more minor profits. It is not like landlording where they are purely parasitising by having renters pay their mortgage. I’m also not talking about the Dysons or Clarksons of the world, obviously.
As an agricultural scientist however, some of what you said seems contradictory to what I’ve learned. In industry for example, I personally knew plenty of scientists with PhDs on wages below £30k with seniors only hitting £40k~. I find it hard to believe they’d pay so little if farming as a whole was lucrative, and many things in environmental studies are low paid as it is an industry supported by grants rather than direct profit.
Have you spoken to a senior academic in agriculture about this? This is my main question, as while random commenters aren’t really worth your time for debate, the guys who’ve worked as crop scientists for 20+ years surely are.
P.s. Debates on Sky News are utterly useless as they have a vested interest in lying for soundbites.
I am not sure what I am meant to do in response to most of your comment: my response is that change happens and farmers are by and large more able than most to handle it. There is also nothing to stop them becoming better paid farm managers having sold their farms, leaving them very well off.
I agree re Sky News – but the farmers are becomibng very agressive about it. They really are making it clear that some of them are very unpleasant people.