To wonder why agricultural land is worth so much?

Local planning can already put 'agriculatural ties' onto properties, meaning those looking to get into farming without paying over the odds and needing to compete with speculative housing developers do already have options.

The issue is noone really knows where they stand with the sudden introduction of the new IHT laws. It's no secret, that farmers have had to diversify their business models to stay afloat so many have been running B&Bs, glamping etc. 'Farm estates also use Business Property Relief (BPR) to reduce their tax burden, which is now also subject to the million pound cap – and farming groups say when the value of business assets are added in, this would bring more people over the threshold to pay'. [source channel4.com].

He’s LOVED by farmers up and down the country.

OP you need to watch Clarkson’s Farm. You really really do.

Im no fan of Jeremy Clarkson but it is an education in how farming works and just how very very difficult it is to make any money. He comes across as a plonker for much of it to be honest. He’s a very very bad farmer but he keeps trying.

Watching Kaleb nearly cry at the end of last season’s farming was heart breaking. It makes you see what they’re up against. He’s a seasoned farmer and even he could barely bring in a profit.

While JC has been a lying idiot about IHT and I can’t stand his mysoginy, I have to applaud him for how he’s raised the plight of farmers and the difficulties they face. Even the farmers in France love him and want a similar figurehead.

Consider also that we only grown 50% of our food. We import the rest. Remember how Spain just experienced terrible floods?

A lof of poly tunnels were wiped out. This sort of thing will become more frequent. Cost is food will only go up.

We used to grow 75% of our food. What does that tell you about farming? It’s contracting. The government doesn’t give a shit about food security which I find really worrying.

I agree that elites shouldn’t own farms as a tax dodge but they all as far as I know work the farms. As others who own land above have said, you can’t leave land to do its own thing, even fields need managing. And it makes sense to employ tenant farmers.

The sad thing is that prime grade A1 farming land is continually being sold off for housing developments. You can never get that back. Once the concrete goes in, that’s it. No more food. Ever.

I feel the U.K.‘s future looks bleak. I’m not sure that 20% inheritance tax was the right thing to do. It’s a huge administrative burden now for farmers if you look into the small print of family succession planning. The likes of Dyson etc will just look for clever ways to dodge it further.

I have been pondering the same thing since the budget announcement. Here are my musings

A commodity has value if people want it.

People want things that they perceive are valuable.

So the circular argument scrutinised too deeply implies that nothing is really worth anything.

Different commodities prices rise and fall with demand vs supply. OPEC can make the price of petrol go up be restricting supply for example. Shares in companies go up in value when a lot of people want them - and a lot of people want them if the perceive the business will make a big profit.

When the economy is shakey and it's difficult to know which businesses will make a profit, a lot of investors turn to commodities which have a more stable value, such as gold.

Land is a commodity in this way. It can't rust away or get stolen. It can't evaporate with a stock market crash. Its value is not based on its potential agricultural yield - that's an additional benefit unrelated to the the land's value. Its value is intrinsic to itself in the same way as gold, it has value because people want it, and people want it because it has value.

Most farms are worth less than £2m and will be unaffected by the IHT. Most farming families with farms above that threshold will find ways to incorporate their farms to ensure that no significant amount of farming assets are included in a taxable estate, it will only happen when there's a tragic accident that takes a member of the family unexpectedly rather than them dying of old age having divested themselves of their asseys 7 years earlier. When that happens, and if the family have to sell £1m worth of farmland to pay an IHT bill, that land will still exist. It will not be lopped off from East Anglia and towed across the sea to another country, it will stay right where it is and can continue to be farmed, potentially rented back to the original farmers at a reasonable rent that reflects the actual agricultural yield and the (low) profit that can be made from it, or potentially by its new owners. I would suggest a reasonable ammendment to the proposed changes should be that any land which is sold from a farm to pay an IHT bill should have its title deeds amended with a restriction to say that the owner of the land is obliged to actually actively farm the land or is liable for a fine, to ensure that any such land stays productive. If such a restriction puts a downward pressure on the price of land and makes the land less valuable then that's a genuine benefit to real farmers, as it will reduce their exposure to IHT, and will only damage the "fake" farmers who bought the land as a tax dodge

Yep. Hence the suggestion, rejected by the gvt, that they should have a transition period whereby those over 80 have a delayed start to the new regime.

Yeah, sorry I meant gift (to DC) not sell.

They definitely could gift the farm and retire. But: they need to plan for this and they don’t. Farms supporting several families struggle. Farmers need to think about retirement planning much earlier - like most business owners.

Yes, I did. My brain said "gift" but my fingers wrote '"sell."

A discussion on Radio 4 this morning included the point that the average age of farmers is increasing because since the IHT concession was put in place, farmers no longer retire but continue to keep the farm in lieu of making pension provision. Another reason why it's increasingly difficult foe a young person to acquire a farm.

But if they've gifted the farm to their DC (and the whole point of the farmers' complaints is that they want to pass down to their families) would they be losing their livelihood? Would they not continue to take an income from it in the same way that their children have been taking an income rather than working for free?

There’s quite high demand! Hence the prices! You can get new farm buildings and the new owner might not want the house. It’s standard to do this. Equipment gets moved when required from the larger landholding.

But you’re banking on a neighbouring farmer firstly wanting more land, secondly being able to afford it. Not sure there’s a lot of demand for fields with no farmhouse or yard/outbuildings. Sometimes you might get lucky and next door want some more fields.

and with many farms access to fields would be via the drive of the farmhouse so you’d have to grant access up the drive as part of the sale which makes the house less attractive when selling in the future.

Do you mean retain their house but gift the land? It's a possible option depending on circs. Hopefully they would not die within 7 years of the gift.

Yep, and lose their livelihood in the process - the one they've spent their lives to date doing so they aren't qualified to do anything else.

They wouldn't of course have to sell the whole estate. They could sell the land and retain the house, with the minimum reasonable garden around it.

In a way the government attempted to tax the investors who are avoiding IHT but - they do actually farm the land! Dyson and Clarkson are in it for Dyson and Clarkson. Plenty of research goes into farming and Dyson will be making profits for Dyson as a result of R&D.

Maybe the tax limit should have been higher? However these rich people have complex family trusts so will avoid paying tax. Dyson has moved production abroad . He cannot even be bothered to employ people here.

Not many farmers can sell for development. Land must be included in a development plan worked uk by the Local Authority. Not in the development plan - no sale of land for housing. Small farms are bought by big ones. This determines market value and quality of land and farmhouse matter. In the SE it’s easy to get to £3m. Selling up has been the norm for decades. Bigger farms have a better chance of making money and sheltering wealth.

Farmers do work incredibly hard but haven’t always thought about setting up a limited company (no IHT put this on the back burner) or how the farm should be passed on. One farm might be trying to support 3 families when initially it supported one.m, hence low profits for more than one family. Sons and daughters come on board and want an income. Thats not a sustainable model for a mid size farm and definitely not for a small one. Diversification is vital but many don’t do it.

The value of the land is only irrelevant if there isn't a massive chunk of inheritance tax to pay on it! If your land doubles in value, then the amount of tax that needs to be paid on it also doubles, so yes the value makes a massive difference if the kids do want to keep farming it.

They may well have to sell off enough to pay the IHT bill, that the farm is no longer viable. But if the farm isn't liable for IHT, THEN they can keep farming it.

There was a TV program last week discussing this and they told that land became more expensive because rich people started buying it to avoid inheritance tax.
apologies if it’s mentioned already.

The land itself is valuable. It's an asset which they could sell to make money, but it's also how they make a living. Some farmers do make money by selling some of their land to developers.

Something else to consider when deciding if farmers are exclusively farming in an agricultural sense is that for many many years farmers have been encouraged and incentivised to 'diversify'. Specifically because farming doesn't actually cover its own costs in a lot of cases but we need the produce.

So a farmer with a campsite that pays the bills so they can continue growing food / raising livestock - are they exclusively farmers? What about lama trekking? Educational visits from schools? Old barns that are now holiday lets? Farmers that are also working off the farm, like agricultural contractors? Lorry drivers? On the till in Tesco? How about making finished food products and selling direct to the consumer like ice cream or pies or whatever?

Except you don't often know what you will get paid until you are paid. Farmers do not set the price of their produce, the buyers do. The individual farmers are very small beans in comparison to the big retail buyers, who will pass the blame onto the eating populace even though it is the supermarkets that controls the price of food it'll be our fault.

Agriculture is like no other business in this country, however business works, agriculture does it differently. Not just in the way the industry is structured but also in peoples perception of it.

Certain industries attact ire if anyone makes money in them or gets a decent wage commensrate with the level of effort put in. Charities, NHS workers, and farmers all come under this unspoken public rule that makes people spit feathers.

Definitely. I used to date a farmer years ago, he and his dad worked the farm…..his dad was in his late 60s. And my ex also worked doing the milking on a different farm and was also a fencing contractor.

theyd also diversified, I ran a pony trekking business from the farm, they owned donkeys and “did the donkeys” on the local beach and a couple of holiday lets in old farm barns which had been done up. The actual farm did not make much money/barely broke even.

It was sold after his parents died, no idea if its still a working farm.

It seems to me that we really have to find a way of taxing those who are investing in agricultural land with no intention of actually farming while protecting those that are actually engaged in the business of producing our food.

Op You headed your post ‘To wonder why agricultural land is worth so much’, but as I suspected you really just wanted to discuss how the likes of Jeremy Clarkson should pay more tax.

James Dyson is doing some extremely interesting work developing new technologies to enable farmers to farm efficiently and sustainably. The man is a genius.