Welcome to our summer edition of Farming Matters. A lot has changed since our last issue and most of our conversations and the underlying theme of…
Those who farm land will be busy harvesting, making hay and silage making. However, the beginnings of radical changes being introduced because of The Agriculture Act 2020 will not have escaped their notice.
Linked to this, there is an acceleration in the public and political momentum for carbon reduction and carbon capture. With farmers and landowners managing and controlling significant swathes of land across the UK, it is to them that both responsibility and opportunity will fall.
You may be the type of farmer who simply wants to get on with farming in your way. That is perfectly understandable, but the direction of travel of UK food production, environmental consideration and carbon reduction seems irreversible. In simple terms, one needs to adapt or fall behind/get caught out.
So exactly what should you be doing, you ask? Well that is the issue.
Like any new technology or new policy, detail is often limited, sketchy and contradictory. Retailers likewise are often slow to react to the reported desire for change unless it is seen as an opportunity to promote their sales and bottom line, in which case they will exploit the rhetoric without necessarily funding those who supply them to deliver on new production methods.
We are already seeing a re-emergence of new renewable opportunities such as on land solar and solar on buildings, and these have a place in the right circumstances. We are also experiencing an interest in nitrate and phosphate offsetting schemes, particularly relevant for those who farm within the appropriate river catchment areas and those who currently operate in sectors that themselves are considered challenges for both nitrate and phosphate levels.
Adapted farming methods that reduce carbon release and in fact encourage carbon capture are options that are available but, as already stated above, such options can only prove economical if they are supported by a premium for the end product produced in a way that generally fulfils the green aspirations of those driving policy.
Lagging behind the ambition for environmental improvements and carbon reduction is the tax system, which remains firmly stuck in the era of food production and husbanding of land for the purpose of cropping and animal rearing. That is the general definition of farming and thus agricultural land for tax purposes as things currently stand.
At PKF Francis Clark, our agricultural accountants and advisers are particularly keen to work with HMRC and other professional bodies to ensure that tax incentives and tax breaks evolve quickly enough to encourage farmers and land owners to consider adopting the policies that our politicians are increasingly thrusting upon them. For example, should it be a concern if your land is given over for on land solar and should you really be having to reorganise your affairs if you pursue this option to avoid the current risk of significant extra capital tax charges, particularly Inheritance Tax if the landowner dies?
There is a real concern that all taxes are going to rise; be they taxes on income and profits or taxes on assets. One of the golden opportunities to encourage the environmental aspirations our policymakers seek is to develop new tax reliefs that will enable landowners and farmers to make the decisions to adopt new methods knowing their tax position will not be prejudiced.
If you are concerned about capital taxes, tax planning and risk to your business should you be considering alternatives outside of mainstream agriculture, please do contact with one of our specialists in the rural and landed estates teams.
This article can also be found in our latest Farming Matters newsletter. To view and download, click below.