Taxing death

Since the new Labour government’s Halloween horror show budget last month, the farming sector has been in turmoil. Up to now, farms have mostly escaped inheritance tax on land and equipment, with a mixture of Agricultural Property Relief (ARP) and Business Property Relief (BPR). Suddenly, they are faced with a 20% tax on death after the first million pounds. They’re being told to give their property to their children, make sure they don’t die within seven years (or they will still have to pay inheritance tax), and find some way to fund their remaining years because if they carry on running the farm as before then HMRC won’t accept it has been given away at all. Or set up some complicated and irreversible trust or company structure to avoid it, with consequential and ongoing fees to accountants and solicitors to make sure they don’t fall foul of the ever changing tax rules, and hope the government doesn’t kick the stool away from that too next year.

DEFRA’s own estimates are this will affect 66% of farms, despite ministers’ claims otherwise. £1m might sound like a lot but it’s about 100 acres of land, which is not a viable farm these days, and even less land when you take equipment and buildings into account. £1m isn’t even that much of a house in some parts of the country. Take the shabby-looking London terrace house in the middle: on the market last year for just under a million, and sold by one Jeremy Corbyn.

The Country Land and Business Association has run the numbers for a typical farm in England Wales: a 200-acre farm owned by one person making a profit of £27,300 a year would face a £435,000 inheritance tax bill. How on earth are they supposed to pay that? By selling off chunks of land each generation and becoming less and less viable.

In my view, the unfairness and the perverse incentives to buy land temporarily to try to avoid inheritance tax, arises from the nature of wealth taxation. We should only tax economic activity. Inheritance tax should be replaced with capital gains tax when land is sold, with a reinstated taper relief to remove the effect of land price inflation. That way speculators on specific plots pay tax, and there is no incentive to temporarily buy land to shield wealth from IHT. But multigenerational family farm (and forestry!) businesses can just get on with it.

But it got worse. After the budget some very worrying ideas surfaced from Labour’s outriders. After finishing as one of Tony Blair’s political advisers, John McTernan went on to work for Labour parties in Australia and Scotland, with varying degrees of failure to be blunt. A week ago he gave a car crash interview in which he said we don’t need small farmers and they should be closed down just like “Thatcher did to the miners”. Which seems bizarre. “No farmers, no food” after all, surely? Or maybe he just wants collectivisation into large farms run by corporations? Or maybe it’s even more sinister as some of George Monbiot’s thoughts from 2020 resurfaced too. We can do away with livestock and arable farming by growing microbes in vats, heated by solar and wind power. Then we can rewild the farms and just eat bugs. Simple!

Now I’m not for a moment saying this is the government’s current policy. But clearly there is some kind of spectrum within Labour that goes from the incompetence that puts government ministers in front of cameras to spout figures that DEFRA’s own reports contradict, to the sinister plotting by the Guardian’s leading nature correspondent to “destroy farming” and replace it with bacteria from Big Pharma grown in factories so he can have wolves back. And yes, lots of lovely woodland back too, but at the cost of eating artificial bacterial sludge.

Not very much forestry and woodlands so far. But I am getting there, and in passing the £1m limit on Business Property Relief applies to them too. We can’t have a lot of family forestry businesses at that scale that aren’t set up as companies, but I’ve not found any figures for their numbers.

I think all of the above is a symptom of the disconnect between urban and rural, and politicians’ lack of understanding not only of rural issues but of the fact they don’t realise they don’t understand rural issues. We’ve talked before about why we desperately need to reconnect people to nature and to the countryside, but we see it played out now with DEFRA ministers representing city centre constituencies and with no understanding of their briefs.

This isn’t a new thing. We had bits of harm done by the Conservatives too.

I’ve written before about the awful mandatory Ready to Burn scheme in England which requires hundreds of pounds per year in registration fees to Woodsure to sell even trivial amounts of properly seasoned firewood. And yet the new regulations do also provide for proper enforcement by Trading Standards, who are the experts in weights and measures, and give them the tools to make test purchases and recover their costs from people illegally selling wet firewood, without needing Woodsure. Frankly, Michael Gove fell for the pitch from Woodsure/HETAS and civil servants looking for a quick fix. With no real knowledge of the countryside, he blundered in without understanding the consequences for people trying to get started, or wanting to make sure forestry and arb arisings, and even fallen trees on farms, become useful net-zero woodfuel.

Then Gove also oversaw the scrapping of the Four Year rule in planning law, which allowed buildings to become unambiguously safe from enforcement action after four years of no one being bothered by them enough to object. Now it’s Ten Years. So not a vast increase in regulation, but a more than doubling of the uncertainty when you put up structures for drying firewood or storage and aren’t sure whether they are below the local threshold in practice.

Finally, Gove’s attempt to make it easier for farmers to run popup campsites actually removed our ancient right to camp on our own land for recreational purposes, unless we register a small campsite with the council – and run the risk of being refused because it’s on a flood plain. Who are these people to deny us the magic of camping in our own woodland with friends and family for a week in the summer?

So what do we do? Make a fuss every time? Make a point of explaining why they’ve missed the consequences of their changes? Hope they eventually realise the limits of their understanding and decide to leave well alone? Perhaps.

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