America is ancient - not a new world

 

The unintended consequences of taxes that overlap on a subject like Inheritance Tax - a UK example from the agricultural sector

1) Agricultural Property Relief (APR) allows owners of farm: land; buildings; cottages; housaes to pass these assets on to their families , either in their lifetime or via their will, free of Inhertance Tax (IHT). APR was originally introduced because, given the low profits in farming, and that, without APR, those inheriting farms would have to pay IHT at 40%, those inheriting would have to sell much of the farm inherited to service the IHT tax bill. To qualify for APR land must be used for genuine agricultural purposes. The relief can be either 50% or 100%, depending on factors like ownership and occupation. APR was seen as a way of encouraging the continuation of farming businesses within families.   

2) APR has attracted high net worth individuals who are not farmers, buy can see that investing their wealth in farmsgives them a IHT exempt asset. This tax advantage has driven up land prices, making it harder for farmers to buy land. Critics of APR have also pointed out that it benefits wealthy landowners at the expense of the taxpayer.  As farmland is increasingly viewed as a financial asset rather than a productive resource, there is a risk of neglecting soil health, biodiversity, and the production of essential food crops. 

3) Even if APR was abolished or capped, farmland would qualify, provided certain conditions were met, for another form of IHT relief called Business Relief (BR).  The relief can be either 50% or 100%, depending on the nature of the asset and the business. For instance, shares in unquoted companies typically qualify for 100% relief, while farmland used for business purposes might qualify for 50%.

4) Capital Gains Tax (CGT) rollover relief via APR allows farmers to sell land with planning permission for development (which has an uplifted value), and then rollover the proceeds into buying farmland without paying any CGT.  It is thought this rollowver buys a 1/3rd to 1/2 of all farmland in the UK 

5) If CGT is raised from 20% to 45% then this gives a bigger incentive for farmland oeners to rollover development gains into more farmland purchases 

6) The Private Eye article suggest that if APR was abolished that may raise more revenue for the Chancellor whilst helping to dampen farmland prices. The article is silent on how the IHT then payable on farms inherited would mean those inheriting, (who were from the low profit farming sectos) would probably have to sell much of the farm inherited to service the IHT tax bill. 

7) Reforms to close down the use of APR and BR as mechansims for high net worth individuals to get relief from IHT might include:

- Requiring a minimum ownership period or active involvement in management;

- Setting minimum profit levels or requiring a certain proportion of income to come from the asset;

- Limit the amount of relief available based on the size of the business or land holding. This would prevent large-scale land purchases solely for tax purposes;

- Introduce restrictions on relief for assets held within closely held companies, where ownership and control is concentrated among a small group of individuals;

- Implement measures to prevent asset disposal disguised as a transfer within a business structure to qualify for relief;

- Place restrictions on land use after claiming relief, preventing rapid changes in land use that are inconsistent with agricultural or business purposes.

8) Whatever combination of the abobe or other reforms might be chosesn, a gradual reduction in relief over a specified period would hopefully encourage a more balanced approach to estate planning.

Alternative Tax Incentives: Consider replacing or supplementing APR and BR with alternative incentives that support business growth and succession, without providing such significant tax advantages.

9) Obviously in all of this, it is essential to strike a balance between preserving the benefits of APR and BR for genuine business owners and farmers wishing to pass on their business to their families while preventing their abuse by the wealthy. 

Sources: 

 - Initially the asserted facts in a 'The Agri Brigade' article by 'Bio-Waste Spreader" in issue no. 1630 of Private Eye 16th August to 29th August 2024 

- Amended to include info from Gemini AI queries using these sources: 

a) Agricultural Property Relief for Farmers and Land Owners - Butcher & Barlow LLP; 

b) The advantages and urgent considerations of Agricultural Property Relief - Smailes Goldie; 

c) Agricultural Relief for Inheritance Tax - GOV.UK; A Brief Guide to Agricultural Property Relief - Herrington Carmichael Solicitors 

d) Business Relief explained | Octopus Investments;

e) Business Relief for Inheritance Tax: Overview - GOV.UK;

f) IHT Business Property Relief: Wholly or mainly - HMRC internal manual;

g) Agricultural Property Relief | A Guide for Landowners - Saffery;

- Amended given the application of HI 

4min 6sec @techinsider clip - How Japan Is Reshaping Its Agriculture By Harnessing Smart-Farming Technology

food #mythbusters - do we really need industrial agriculture to feed the world?

found via foodmyths.org

in summary

- the corporations that profit from industrial farming (those selling pesticides, fertilizers, or chemicals) have spent billions trying to convince us that because the world’s population keeps growing we need to double food production their way. 

- the industrial approach means the following: farmers stop practices that keep soil healthy and go for single crops; livestock gets crammed into polluting factories; farmers have to buy expensive inputs from ever-fewer corporations.

- and with the industrial approach pests become resistant (so more chemicals have to be used), livestock become sicker (so more drugs have to be used) and soil loses its natural fertility (so more chemical fertilizer has to be used).

- and when farmers try to sell their crops, they face only a few big buyers offering unpredictable prices. 

- but there is an alternative - state-of the-art sustainable farming

- sustainable farmers build healthy soil by planting a variety of crops and rotating them. they raise animals on the farm, not in cramped factories. they fertilize using compost and livestock or planting soil-nourishing crops. healthier plants with good crop rotation also help keep pests in check without hurting the bugs we need – like those all-important pollinators.

- plus there are other good impacts  - better topsoil, less water usage, fewer antibiotics, less toxic run off (Industrial farms degrade and erode precious topsoil, use huge amounts of water – much essentially irreplaceable from deep underground, use lots of antibiotics that leads to resistant new bacteria, and produce toxic run-off that pollutes rivers, oceans, and us)

- so the sustainable farm is better for farmers and the environment.

- and it can really feed the world. sustainable farms produce as well as industrial ones - and in drought years even better.  small farmers already grow 70% of the world’s food  - and they don't have to follow the industrial path to increase production

- industrial agriculture doesn’t reliably grow more food in the future – or even today - it requires more fossil fuels, water,and mined minerals – all of which will only get more expensive as it runs out. 

- and finally - if we don't double food production will we really go hungry?

- actually we already have almost 3,000 calories a day available for every human being on Earth – more than enough. (and that’s after wasting a third of all food grown, or not eating it directly) . 

- 1/3rd of the world’s grain is going to livestock.  In the USA the biggest crop is corn, but less than 1% of all corn planted is eaten (most goes to fuel or feed)

- so the next time someone who makes frozen pizza – or toxic pesticides – tells you there’s only one way to feed the future, tell them their story is full of holes. 

- the evidence is clear: sustainable farmers prove we all can enjoy healthy food – and we each have power to make this happen. we can redirect our own food spending and the billions in public money now going into the pockets of industrial farming corporations.

- we can stand up and speak out for sustainable farmers at home and around the world.