Tenant farmers - Beware the new VAT trap!

Does Gordon Brown’s VAT reduction now replace a rent-review, asks top agricultural lawyer

Gordon Brown has changed the VAT rate, and a court Judge has decreed that VAT is part of a tenant farmer’s rent.

That simple fact opens a massive can of worms for tenant farmers, according to the national head of agriculture at law firm, Clarke Willmott.

Tim Russ, Clarke Willmott’s head of agriculture, said: "A judgement against a Cornish tenant farmer, which decreed that the newly reduced VAT rate represents part of the due rent, demands a trip to the appeal court: if VAT is part of the rent, which would seem odd, then it needs to be clearly stated: and if not, as seems more reasonable, any change in VAT represents a change in rent and pre-empts contractual rent-reviews under the Agricultural Holdings Act.

"The recent judgement by Mr Justice Lewison in the case of Cornish tenant farmer, Mr Mason, against his land-lord (Mr Boscowen), found that the Government’s recently changed VAT rate represents part of the rent. That judgement puts Mr Mason at risk of being evicted from his tenancy.

"Mr Mason had withheld rent-payment over the issue of VAT – and the newly changed VAT rate – on the basis that this is not part of his rent, but is a tax.

"The Judgement decided that the changed VAT is part of the rent", said Mr Russ.

"If that is the case, then any change in VAT replaces the standard tenancy rent-review: this means that the recent change in VAT replaces any contracted rent-review. That could be a cheaper option for tenant farmers.

Alternatively, Mr Justice Lewison got it wrong, and VAT is a tax, rather than part of the due-rent. It will now require a reference to the Appeal Court to get that resolved", said Clarke Willmott’s Tim Russ.

"This silly situation underlines the potential for Government action, designed to address one part of the economy, having unforeseen consequences for specific sectors, like farming", he added.