Tenant farmers have written to the Chancellor of the Exchequer with proposals for reform of taxation to encourage longer, more sustainable Farm Business Tenancies (FBTs).
The current taxation system 'does little to encourage good practice' and rewards landlords for taking a short-term approach, according to the Tenant Farmers' Association (TFA).
TFA Chief Executive, George Dunn, said: “The Treasury has, down the years, shied away from its responsibility to consider how it can help to influence the market in agricultural tenancies, by rewarding landlords prepared to let land on a long-term basis.
“The current taxation system does little to encourage good practice, and rewards landlords for taking a short-term approach.”
For the tenanted sector of agriculture, of which nearly half is now let under FBT, it is seen as difficult to achieve new sustainability goals.
It comes as the government is challenging the agricultural industry to build resilience, raise productivity, manage risk and secure long-term profitability.
The agricultural industry is also front and centre in raising the quality of the environment. It is assisting with the government objective of ensuring that this generation hands the environment to the next generation in a better state.
Mr Dunn said: “It is difficult, if not impossible, to achieve both goals for sustainable businesses and the environment, when the average length of term is only four years or less, and when 85% of all new tenancies are let for no more than 5 years.
“There is a significant and urgent need to move these metrics to create a longer-term horizon to plan for, and deliver the objectives of sustainable development.”
The TFA is proposing to restrict the 'generous' 100% Agricultural Property Relief from Inheritance Tax, which is currently available to all landlords regardless of the length of time for which they are prepared, to let land only to those prepared to let for 10 years or more.
The group wants to offer landlords prepared to let land for 10 years or more the ability to declare their income, as if it was trading income for taxation purposes.
Tenant farmers also wish to see a clamping down on landowners using share farming, contract farming, share partnerships and grazing licences as thin veneers of trading activity for tax advantage.
Mr Dun added: “The Chancellor has said that he wishes to simplify the tax system. However, he must ensure to deliver a system that supports wider government objectives for the agricultural sector including promoting longer term farm tenancies.”