The looming Spring Budget must do more to encourage farm investment, according to a submission to the Government by the Central Association of Agricultural Valuers (CAAV).
The 16-page document urges the Chancellor to consider a number of proposals to make farming more productive, efficient and able to adapt to current and future demands. The nine recommendations include an income tax relief to encourage letting of land and changes to inheritance tax to remove a bar to environmental uses. The paper also urges a review of capital allowances to stimulate investment in buildings, to help farmers adapt to climate change and invest in new technology.
“Our fundamental concerns are that the tax system supports farming in achieving a renewed pace of productivity improvement, and so contributes to economic growth and resilience,” said Jeremy Moody, secretary and adviser to the CAAV. “In practice, this means enabling the most proficient farmers to have use of the land and to support them in investing and innovating at this time of great technological advancement.”
Critically, farmers need to be able to invest in new technologies when it’s most appropriate to do so, to continue to improve buildings and structures, and adapt to the impact of climate change. While grant schemes are welcome, longer-term changes to the tax structure will enable better use of private money to achieve Rishi Sunak’s aims of greater capital investment in businesses, said Mr Moody.
Specifically, the CAAV has called for partnerships and sole traders to benefit from full expensing (writing off investment in plant and machinery against profits), which companies already have. If not, the Annual Investment Allowance should at least be increased in line with inflation, which has been 24.4% since January 2019, when the £1m limit was set.
It also argues that the Structures and Buildings Allowance (SBA) is not fit for purpose. “Farm buildings are distinctive in the wear and tear they face, meaning they have shorter lives than found in other sectors,” said Mr Moody. “Obsolescence is also a factor with new technologies, increasing standards and regulation, and changing equipment.”
Rather than writing agricultural buildings off over 33 years, farmers should be able to write them off over seven years, as is the case in Ireland. “Such an approach would meet the aims of being both fair and stimulating the investment we need.”
Farmers also need to be able to adapt to climate change, and its resulting droughts, floods, storms and extreme heat. Investment in reservoirs, irrigation and rainwater harvesting systems is therefore essential, alongside flood management works, power systems to support farm operations, and controlled environment storage. “We ask that a class of capital allowance be created so that critical improvements that would ordinarily be within the SBA be treated as plant and machinery, meaning such investment can be written off in the year of expenditure,” said Mr Moody.
Investment in environmental improvement works should also qualify, including covered slurry stores and silage clamps, as should pig and poultry buildings and greenhouses, which are highly automated and can become outdated very rapidly.
“The urgent challenge of improving productivity, the need to respond and adapt to the impact of advancing climate change, and the scale of required environmental improvement are such as to warrant a new approach,” said Mr Moody. “Clear and simple stimuli within the tax system can be powerful levers for positive change.”
- For more information visit www.caav.org.uk.
About the CAAV
The Central Association of Agricultural Valuers (CAAV) is a specialist professional body representing, qualifying and briefing over 2700 members practising in a diverse range of agricultural and rural work throughout England, Wales, Scotland and Northern Ireland.
CAAV members are agricultural and rural valuers who provide professional advice and valuation expertise on issues affecting the countryside from tenancy matters to sales and purchase of farms and land, from taxation and compulsory purchase to auctioneering, and from conservation issues to farming structures.