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Farming

Farmers should prepare for IHT changes

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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.”
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Farming

Police warn of disruption to traffic as farmers protests take place

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FARMERS protests are taking place in Aberystwyth and Carmarthen today (Feb 22.)

The police took to Facebook on Thursday morning saying: “We are aware of potential disruption to traffic in Carmarthen and Aberystwyth town centres from midday today.

“The traffic network in and out of the towns may also be affected.

“If you are planning on travelling in those areas today, please consider changing your route or journey time to avoid delays.

“We will update when we have further information.”

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Farming

Welsh Conservatives challenge Sustainable Farming Scheme in Senedd

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THE WELSH CONSERVATIVES have tabled a motion for debate in the Senedd, aiming to overturn the controversial Sustainable Farming Scheme (SFS) proposals put forward by the Labour Government. The motion, scheduled for discussion next Wednesday, 28th February, calls for the abolition of the requirement for a 10% tree cover on farms and the scrapping of the current SFS proposals, amidst concerns over their impact on Wales’ agricultural sector and rural communities.

According to the Labour Government’s economic impact assessment, the implementation of the SFS could lead to a drastic reduction of 122,200 in Welsh livestock numbers, the loss of 5,500 jobs, and a £199 million hit to the rural economy. These figures have fueled the argument that the scheme could devastate rural communities across Wales.

Sam Kurtz: Unhappy with proposed farming scheme

Samuel Kurtz MS, the Welsh Conservative Shadow Rural Affairs Minister, has been vocal in his criticism of the scheme. He stated, “The economic analysis of the Sustainable Farming Scheme speaks for itself. With the projected loss of livestock, jobs, and significant economic damage, it’s clear that the SFS will decimate Wales’ rural communities.” Kurtz accused the Labour Government of neglecting the importance of the farming industry to Wales’ economy, society, culture, and language, and of ignoring the widespread opposition to the SFS within the agricultural community.

The motion presented by the Welsh Conservatives outlines the significant concerns surrounding the SFS, including the estimated reductions in livestock numbers, job losses on Welsh farms, and the consequent economic downturn. It also highlights the agricultural community’s strong opposition to the scheme and cites a poll commissioned by the Country Land and Business Association in Wales, which found that only 3% of Welsh farmers trust the Welsh Government’s handling of the issue.

In a bid to address these concerns, the motion calls on the Welsh Government to remove the tree cover requirement and to scrap the current SFS proposals. Furthermore, it urges the government to re-engage with the farming sector to develop a new scheme that garners the support of the farming community.

The debate, which is a crucial moment for the future of farming in Wales, is set to commence at approximately 5.30 pm on Wednesday, 28th February, in the Welsh Parliament. This marks a significant effort by the Welsh Conservatives to align with the farming sector and challenge what they see as detrimental policies towards rural Wales.

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Farmers protest as Drakeford arrives to open engineering centre

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PROTESTS erupted as First Minister Mark Drakeford arrived at Coleg Llandrillo, Rhyl, to inaugurate a new engineering centre. Approximately 200 farmers breached the college gates, marking a significant escalation in their ongoing protests against proposed changes to farming subsidies by the Welsh government.

The confrontation on Wednesday (Feb 21) involved pushing and shoving as the farmers followed Mr. Drakeford into the premises, expressing their discontent over the Sustainable Farming Scheme (SFS) that mandates substantial alterations to their current practices. These changes include dedicating 10% of their land to tree planting and another 10% to wildlife habitats to qualify for governmental support.

This incident follows a contentious encounter earlier that day in Pentraeth, Anglesey, where a farmer confronted the First Minister, who attempted to evade the interaction. The protests are a culmination of growing frustration among the farming community, which has been vocal about the impracticality of the demands being made, especially concerning the running of their businesses and the feared increase in bureaucracy.

The Welsh government has defended its stance, asserting that the proposed changes are essential for both supporting farmers and addressing the escalating climate crisis. Officials argue that adaptation and a proactive role in environmental conservation are necessary conditions for receiving public funds.

Aled Jones, a farmer from Rowen, Conwy county, voiced the collective sentiment of the farming community, stating the necessity of unity to oppose what he perceives as misguided proposals by the First Minister. Similarly, Clare Morrilly from Overton, near Wrexham, highlighted the untenability of expecting farms to cede 20% of their productive capacity without dire consequences.

The protest at Coleg Llandrillo is part of a series of actions taken by farmers across Wales, including a significant disruption caused by a convoy of tractors and pickup trucks in west Wales and a gathering at a Welsh Labour leadership debate.

In response to the unfolding situation, Prime Minister Rishi Sunak, speaking at the House of Commons, criticized the Welsh ministers’ approach, which he described as counterproductive. The Prime Minister emphasized the central government’s commitment to backing rural communities across the UK.

The debate extends into the political arena with Conservative MP for Ynys Môn, Virginia Crosbie, raising concerns over the potential economic impact of the Welsh government’s plans, including job losses and a £200m blow to the Welsh economy. She called for the agricultural budget to be ring-fenced to safeguard farmers and food security.

Cover Photo: Philip Ashe

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