Three-quarters of Scottish farms to be hit by UK farm tax hammer

The UK government’s attack on the future of farming which is causing huge anger across the sector and saw tractors massing in London and Edinburgh recently was based on dodgy numbers.

UK Chancellor Rachel Reeves did not consult either the Scottish government or the UK Department of Environment, Food and Rural Affairs to check the numbers. There was no impact assessment or consultation. 

Reeves said only a quarter of farms would be affected - but it turned out that the HMRC was working on out of date valuations and numbers that did not apply to most working farms. Recent research has shown 75% of farms in Scotland over 50 hectares will be hit by the changes.

Scots are proud of our strong farming industry - it turns over £16 billion annually, and contributes 17% of the total to the UK economy - double the population share. It produces world class food and drink that we all rely on and enjoy. We can’t afford to let the UK government take a hammer to it. 

But only with independence can Scotland protect its farmers - under devolution we are forced to sit and watch, as it is subjected to an ill-informed attack based on wrong information by a UK government that does not have Scotland’s best interests at heart. 

Here are three key points about the farm tax.

1 - Farm values are high on paper - but farmers’ incomes are not

Farming income goes up and down as prices, costs and weather fluctuate. But in general it is not keeping pace with inflation and some sectors are hit more than others. 

Last year the average income of a Scottish farmer was £69,000, with the high price of grain benefiting arable farms. But the average income of a livestock farmer in Scotland was under £20,000.

A salary of £70,000 is a high income - but someone in that position cannot pay a huge inheritance tax bill of hundreds of thousands even over ten years. Many farms in Scotland over the £2 million threshold would face annual IHT payments totalling £100,000 per year over 10 years. 

The cost of farmland on paper has been rocketing. There are lots of factors pushing up the price. One is the appetite of the super-rich for farmland, because of tax reasons. But this new rule change is unlikely to change that much - the fact that the inheritance tax bill will still be lower on farms than, say, yachts will still make it an attractive investment. 

Another reason for the rising cost of land, in Scotland especially, is the emerging market in carbon offset - financial institutions want to buy land and plant trees on it. They can acquire carbon credits which can be used to mitigate things like air travel. And there are lifestyle reasons why the wealthy want houses with lots of acres around them. 

A tax on wealth would be more effective than a tax on farms. 

2  -The failure to think the tax through should be classed as criminal negligence

The UK government repeatedly claimed when it made the changes that a farm worth £3 million can be passed on free of inheritance tax and that only about one in four would be affected. 

That data was based on HMRC calculations that were done under the old system. Farms were not asked to update the value of their farms because they weren’t subject to inheritance tax anyway. The figures HMRC was using included many that were not working farms.

They did not check with the Scottish or Welsh Governments, or with DEFRA or consult with the NFU or the NFUS. That was negligent. 

They exploded a bomb under hard-working farmers. There are a lot of elderly farmers who had been advised not to hand over their farms early because of the existing rules. They will be hit the hardest, as will their families. A Welsh MP said a farming couple told him "'if only I could die now" to avoid the charge.

These new rules mean many farmers will have to sell up. The land may still be farmed - or it may be used for other things, impacting food and drink production. The number of farms in the UK is already falling and is predicted to drop by more than a fifth by 2040. 

3 - Post Brexit Scotland is getting less and less money in real terms to support farming

Access to affordable, nutritious food is the basis of health and wellbeing. The purpose of the European Common Agricultural Policy, created in the aftermath of World War Two on a continent which had experienced food scarcity, was to safeguard food production and make sure food was affordable. 

It was accepted that a proportion of the cost of growing and producing food should be met by the taxpayer. 

In its early days, the CAP was a victim of its own success, criticised for producing too much cheap food - “butter mountains” and “wine lakes”. Since then it has been changed. The CAP is awarded on a seven-year cycle and is partly given as a basic payment according to how much land is being farmed. That gave farmers a bit of certainty - they knew what money they could rely on for the next seven-year cycle.  

Agriculture in Scotland is devolved and Scotland is sticking with a basic farm payment system to try to support food production. But, while under CAP, the farming sector received ring-fenced payments on the seven-year cycle which were adjusted in line with inflation etc, now Scotland is getting less and less money in real terms every year to support farming.  

The UK said it would pay Scotland the same as it got from being in the EU but it has not lived up to this promise. 

By privatising energy in the 1990s it has created a situation where Scottish agriculture businesses are also having to cope with the highest energy bills in the world. 

Conclusion

It is frankly disgusting to see hard working farmers being pushed to the wall by inept and careless changes in tax rules, made without consultation or impact assessments. 

They come on top of other attacks on the sector by the UK government - pushing through a Brexit Scotland didn’t vote for. Privatising energy so that bills are way above what EU countries have to pay. 

The Scottish Government can’t do anything about the decision to introduce new inheritance tax rules without consultation. It does not have the levers to control this. 

Only with independence can Scotland give the solid support that its agricultural sector needs to keep on producing so much that is vital to Scotland’s health and prosperity.