Income tax relief could increase availability of land

"In a time of uncertainty, it has never been more important to encourage talent and innovation within the agricultural industry and we are fortunate in Scotland to have a wealth of enthusiastic individuals from a variety of backgrounds all keen to enter and succeed in farming. NFU Scotland’s Joint Venture Hub has identified that there are a number of farming entrepreneurs looking to get their foot on the ladder, or perhaps even move up a few rings.

For agriculture to thrive it must have the ability to change with circumstances. The arrangements by which landowners can and will make land available to farmers, including tenancies, are critical to that process. Impediments that make those processes more difficult or costly hinder the tenancy sector.

The tenanted sector in Scotland has been in decline over the past century and the Next Generation group believes that a more commercial vehicle that enables a business-minded approach could open up the let sector once again. The Next Generation group believes that taxation is the key to a dynamic and fluid land sector in Scotland. For example, we strongly believe that the introduction of Income Tax Relief, for those who let land out on long term agreements, would be of significant merit in improving land movement and reform in agriculture.

Speaking directly to owners’ concerns, this tax-based approach seems likely to release more land. The Irish Government introduced substantial increases in Income Tax relief from 2015 on the arm’s length letting of farmland for more than five years. In the first year of the increased relief, the let land area rose by 50%, The successful introduction in Ireland of rent relief from Income Tax, geared to length of tenancy, has encouraged more letting of land over longer time periods. There has been a 30% increase in the number of landlords offering tenancies for five years or more.

NFU Scotland strongly believes that creating similar opportunities to open up the let land market would directly encourage and incentivise productivity within the agriculture sector. If Scottish Agriculture is to become less reliant on direct support, more profitable, deliver more public benefits and seize new market opportunities after Brexit, then increased productivity is a necessity.

One of the driving reasons behind tax changes is to improve agricultural productivity and Jeremy Moody’s discussion paper – Encouraging agricultural land lettings in Scotland for the 21st century stated that ‘moving land out of the hands of the over-65s might see output (taken here as a proxy for productivity) grow by 4 per cent or a little more, moving land into the hands of the “trained” saw on average an increase of 12 per cent.’

There is no magic bullet but by introducing measures such as Income Tax relief on long term let land, supporting NFU Scotland’s Joint Venture Hub as a means to match those looking to collaborate, and a future support system based on activity linked to productivity and environmental measures, rather than land ownership, would all go some way in making Scottish agriculture more competitive, resilient and profitable."

(This blog was originally published on www.nfus.org.uk)