Farmers are being forced into a catch-22 situation as they grapple with investing in environmentally friendly farming that could push them into paying inheritance tax, some farmers claim.
The government has defended imposing 20% inheritance tax on farms worth more than £1m by saying they are supporting farming by putting £5bn towards “sustainable food production and nature recovery”.
Farming groups are united in their condemnation of the inheritance tax introduction, as they have said farmers will have to sell land to pay for the tax.
But farmers are now facing a further dilemma as investing in environmental measures on their farmland, which the government wants them to do, could push the value of farmland up – and either bump them up into paying inheritance tax, or mean they have to pay more.
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Cambridgeshire farmer Martin Lines, chief executive of the Natural Friendly Farming Network, told Sky News: “Labour’s policy has created a catch-22 for farmers.
“They are now caught between investing in long-term sustainability or holding back on improvements to avoid triggering future tax liabilities.
“In a sector that thrives on long-term planning, this kind of uncertainty could stall progress on the very climate and nature restoration goals that are vital for the future of farming and food security.”
The government is encouraging farmers to invest in environmental measures through public funding, from planting hedgerows to re-wilding large portions of land.
Private investment in farms is also increasing due to the government’s environmental push, with money coming from wildlife charities through to large corporations.
Big companies, especially developers, are buying up or renting farmland so they can honour the government’s biodiversity net gain initiative, set up under the Tories.
Since February this year, all new road and housebuilding projects must achieve a 10% net gain in biodiversity or habitat, so they leave habitats for wildlife in a better state than before.
They can plant on the site but most are choosing to buy up farmland or rent fields to plant wildlife, which is likely to push up the value of the land.
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As inheritance tax is based on the market value of farmland, plus farmhouses, buildings, machinery and livestock, farmers are concerned investing in these environmental initiatives will boost their value and they will have to pay more inheritance tax.
The government has said most farmers will not have to pay inheritance tax until the farm is worth £3m due to tax relief, which doubles if a farm is jointly owned by a couple.
However, farmers have disputed that and said most farms are worth more than £1m and many are not owned by couples.
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Mr Lines, who is a third-generation farmer, has been involved in environmentally friendly farming for years but said he is now facing uncertainty about how much to invest in measures due to the inheritance tax.
He added: “For the many tens of thousands of farmers who are not nature-friendly or [do not] see the benefits of investing in that, why would they go to all these difficult changes?”
Conservative Robbie Moore, shadow farming minister, said: “Farming businesses, like other businesses, need to plan ahead.
“This Labour government seems intent on making sure they can’t do that, by ripping the carpet out from under them – with a family farm Ttax that will costs them millions and result in their businesses being split up and sold off, accelerated decreases in payments, and the suspension of vital grants to allow them to invest.
“This is what farmers are having to put up with from a city-dwelling government that just doesn’t get it, or care. It’s a disgrace.”
