51AVÊÓƵ

Tenant farmers are being left ‘in the dark' by landlords and their agents, with on-farm investment stifled in the wake of the Chancellor's changes to Inheritance Tax (IHT), according to a new survey by Farmers Guardian and the Tenant Farmers Association (TFA).

Tenant farmersÌý

The survey of 163 tenant farmers found that a quarter of tenants believed their landlord would be less willing to invest in their holding as a result of IHT changes, and 63% claimed that their landlord had invested little prior to the changes and would continue to do so.

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Andrew Robinson, Cambridgeshire arable tenant farmer said IHT changes were 'ill thought out' and 'stifles investment.'

Ìý"My landlord has never made any significant investment in my farm in the last 22 years. Any significant investment has been made by me."Ìý

CommunicationÌý

The Budget changes have also exacerbated issues that were already prevalent within the sector, particularly poor communication. Some tenants even claimed their landlord's agent only got in contact with them when it worked to ‘the advantage of the estate', whether that was requesting ‘a rent increase or taking land back in-hand'.Ìý

The survey revealed it was not just the landlords putting off investment, but tenants too. Some 55% said they would invest less and would rethink investment plans following IHT changes, and 26% of tenant farmers said they had held off plans to join Environmental Land Management schemes.

InvestmentÌý

Dartmoor tenant farmer Helen Radmore said IHT was only going to ‘disincentivise landlords to invest further', adding she had heard ‘zero' from her private landlords about the Budget.

Ms Radmore has several tenancies, including four rolling 51AVÊÓƵBusiness Tenancies (FBTs), three annual grass keeps and one Agricultural Holdings Act (AHA) tenancy, and said she was concerned that private landlords across her tenancies ‘where possible' would take land back so they could ‘manage' the situation.

"As a tenant it is impossible to plan for the long term."

CollaborationÌý

The survey found that 44% of tenants had not been contacted by their landlord or landlord's agent regarding Chancellor Rachel Reeves's IHT reform, with almost three-quarters of tenants claiming more support and information was needed.

Ms Radmore called for better opportunities for tenants to ‘collaborate' with their landlord, adding they were ‘few and far between' in many cases.

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"Policy needs to change or tenants, especially with private landlords, are always at a disadvantage."

Mental healthÌý

The survey found that more than half of tenants (53%) said the Chancellor's Budget and IHT proposals had had a negative impact on their mental health. One of the reasons for tenants' anxiety was the fear of eviction in the next few years in light of the IHT changes, with some already being notified that the farm or parts of land would be taken back in-hand.

Furthermore, the survey found that a quarter of tenants who rented specifically under AHA agreements, said, in light of IHT, they would expect their landlord to attempt to take land back for alternative uses.

TFA chief executive George Dunn said tenants had been left ‘in the dark' as to how landlords would respond to IHT changes and would have to wait for the final legislation in the Finance Bill to be released. But while the tenant sector remained in the ‘twilight zone between announcements and legislation', he said there was still ‘significant evidence' that landlords were taking a ‘knee-jerk reaction'.

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Longer tenancies

Mr Dunn said: "Moves to sell land or repurpose it into more lucrative uses to raise cash for a potential tax charge are an overreaction.

"Given that long-term tenancies tend to reduce the open market value of the land subject to those tenancies, for those landlords not looking to sell their holdings it would make sense to grant longer tenancies – the potential tax charge on death would be considerably lower than if the land was inhand or on short leases with much higher vacant possession values."

One tenant farmer, who asked to remain anonymous, had been told they had four years left on their FBT, and after that the farm, along with others on the estate, would be taken back in-hand.

Tenant-landlord relationships

"We have gone from a very good working relationship with our agent to a very distant working relationship. Everything is done remotely, and quite arrogantly," they said.

Prior to the ‘bombshell' being dropped on the family following a farm visit from the land agent, the farmer had been thinking of further investment and succession, thoughts that have been quickly abandoned.

The farmer did say they counted themselves ‘lucky' they had four years to prepare, and said it was ‘obscene' that they knew of some farmers that had been given 12 months' notice.

'Collateral damage'

The farmer added they feared there was more ‘collateral damage' coming for tenants later down the line, as landlords ‘tighten their belts a little bit more', adding FBTs were ‘easy pickings' and this area needed to be addressed within Government policy.

They questioned why more landowners were not thinking more ‘proactively' and ‘outside the box' to implement ideas like the Crown Estate's recent venture into environmental FBTs.Ìý

READ NOW: Treasury 'do not understand' how IHT changes impacts tenant farmers

Cumbrian dairy, beef and sheep farmer John Robinson said communication with the landlord's agent was ‘poor' for anything before or after IHT, adding that the most contact he had had with his agent was the ‘dreaded rent review every three years'. He said his biggest concern was losing one of his FBT farms.

TreasuryÌý

When it comes to communication from Treasury and Government, the survey found that 84% of tenants, including Mr Robinson, felt the impact of IHT on tenant farmers, and that the tenanted sector as a whole was not properly understood.

Mr Robinson bought a council farm 10 years ago and said the recent IHT changes had ‘moved the goalposts' and he questioned whether it was worth buying the farm after all.

"Will the Government come and milk 20% of my dairy cows, or calve 20% of my beef calves or lamb 20% ofÌýmy sheep or drive 20% of my tractors – I think not. The Government just gets its cake and eats it."

Scottish tenantsÌý

Scottish upland beef and sheep tenant farmer, Andrew Scott said as it stands he was below the IHT threshold, adding it just left ‘everything else in agri-politics to worry about.'

But he said tenants were in a ‘difficult position' as they cannot sell or relinquish part of the holding to raise funds.

READ NOW:ÌýTenant farmers have to 'pedal that bit faster'

"Unless they have other means to secure borrowing, they would need to sell working equipment or livestock thus reducing earning capacity or efficiency."

He said tenants must give ‘careful consideration' to fixed improvements, as that risks increasing the value of the business.

'Lucky ones'

Welsh tenant farmer Naomi Williams-Roberts acknowledged she was ‘one of the lucky ones', describing a ‘wonderful' relationship with her landlord, but added, as a tenant farmer, business security and growth was ‘always a concern'.

"It is very uncertain and difficult not to feel low or worried about what the future holds. We are trying to build a business to eventually secure somewhere of our own. But to do that we need stability. It is a concern on how the IHT will affect this moving forwards."

READ NOW:ÌýTreasury accused of failing to consider Scottish tenant farmers in IHT changes

Government response

A Government spokesperson said: "Our commitment to tenant farmers remains steadfast. That's why £5 billion is being invested into farming over two years, the largest budget for sustainable food production in our country's history, and we've committed to appoint the country's first Commissioner for the Tenant Farming Sector in England.Ìý

"Our Agricultural Property Relief reform means three quarters of estates will continue to pay no tax at all, while the remaining quarter will pay half what most people would pay, and payments can be spread over 10 years, interest-free. This is a fair and balanced approach which helps fix the public services we all rely on."ÌýÌý