Dear Sir,

The Inheritance tax relief on farmland is killing the very thing it was meant to protect.

Family farms are becoming a thing of the past as IHT relief is making farmland a strategic investment for the mega rich and unattainable for farming families. The relief was meant to enable farms to be passed to the next farming generation, but due to this loophole outside investment has driven up the value of land to levels which cannot be sustained by farming.

With such inflated values the next generation can rarely afford to take on the farm from siblings and at current values why would they? It is my belief that the IHT relief and outside investment has increased farm land cost by 50%.

Take a 300 acre farm at £6000 an acre, giving it a current value of £1,800,000. Assume there are three members of the next generation – one keen to take on the farm and two not. The one therefore has to find £1,200,000 to buy his/her siblings out and carry on the farm – servicing a £1.2m overdraft with 300 acres is no easy task.

For argument's sake, say IHT Relief is removed causing land to half in value. The same farm is now worth £900,000. The next generation farmer has to find £600,000 to buy their siblings out, making it a much more achievable goal. Tax does not need to become due under this scenario, land would be treated the same as other assets and if passed on seven years or more before the death of the landowner, no tax would be due and the above figures would apply.

Even in the worst cases where planning has not been possible and the full inheritance tax is due, the one carrying on the farm would still be better off. The IHT here would equate to £360,000 which comes off the value of the estate. The non farmers then receive £180,000 each. The taxman gets his £360,000 and the next generation carrying on the farm has had to pay out £720,000. Still far less than the current situation and more hope of making these figures stack up through farming.

Further to this, the current revaluation on death legislation for the next generation means that it makes poor financial sense to pass on a farm while living, resulting in farms being held by the older generation for far longer than is necessary to get the base cost increased to the current value on death. At a time when the farming sector is crying out for young farmers why are we still supporting legislation which does exactly the opposite and encourages farms not to be passed on to the next generation?

As far as I can see removing this legislation would be a 'win win', encouraging succession planning far earlier than it currently makes sense to do, reducing the financial burden on the family member wanting to take on the farm, and even the government should support it as it will increase their tax revenues. Admittedly the non-farming next generation may not be quite so supportive, but given they are unlikely to be Scottish Farmer readers, we don't need to tell them!

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