Concise Rural Taxation 2017/18 Edition

Due from the printer this week.  130 pages on Income, Capital Gains, Inheritance, VAT, Trusts etc etc including latest changes as they affect farming and the rural economy.  For more details Continue reading “Concise Rural Taxation 2017/18 Edition”

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Twenty-five year Environment Plan

The Natural Capital Committee has reported its recommendations for a 25-year Environment Plan.  There are five key sections to this important report:

  1. Vision, ambition and goals
  2. Investment needs
  3. Milestones
  4. Governance
  5. Agricultural subsidies post-Brexit

Twelve goals are offered; these include:

  • Breathable air that achieves international standards;
  • Flood protection by various means including natural flood management to protect everybody against a 0.5% probability of flooding:
  • All inland water to be of good status, and coastal waters all to be good for bathing;
  • Greenhouse gas emissions conforming to international targets, including emissions from land-based activities
  • Access to local greenspace and open recreation for all.  The following goals are suggested:
    • One hectare of local nature reserve per 1,000 people;
    • Two hectares of natural greenspace within 300 m of every home;
    • A 20 ha greenspace within 2 km of every home
    • No suggestion is made that the effect of this has been modelled and compared with the current state of provision.

Turning to investments the report proposes 11 items and these include:

  • 250,000 ha of woodland by 2040;
  • All peat to be in favourable condition;
  • Restoration of hydrological cycles including channel restoration and natural flood management measures;
  • New National Parks (no suggestions as to where);
  • Farm funding to be limited to public goods and high welfare standards;
  • Working closely with Local Nature Partnerships;
  • Developer contributions via planning etc to be pooled for natural capital investment;
  • An enhanced capacity for citizen action and involvement;
  • Natural Capital Net Gain principle which would apply to planning, environmental regulation and public procurement wherever possible;
  • Despite being referred to as investments, none of these are funded or compared with the status quo.

Five year milestones are proposed, which need to be supported by a natural capital risk register; accounting measures; cost benefit appraisal approaches and natural capital balance sheets.  Pp 8 and 9 of the report make particular mention of the private sector in this respect but do not expand on this point.

It is proposed that there should be a State of the Environment Report by 2019 and that this should be updated regularly.  For governance the committee propose that the 25 year Environment Plan should be placed on a statutory footing under the authority of a single organisation, with a separate independent body on the lines of the National Audit Office to report regularly on progress.

The final section is concerned with agricultural policy and is perhaps the vaguest part of the report.  Much is made of the examples of market orientated projects like South West Water’s involvement in Upstream Thinking.  Although the report claims that several water companies are involved in such schemes, this is the only example to be cited.  There are indeed other examples and it is a shame that the report does not address more fully the challenges in developing new thinking in this area compared with its more defined focus in earlier sections.

Perhaps on the other hand however, this should be welcomed by those of us who have spent a lifetime involved in day to day management of rural estates and farms as an opportunity still to bring practical common sense and hard-earned local knowledge to further deliberations on these matters.

This provides the perfect opportunity to finish on an event being organised by the Ecosystem Knowledge Network with the Tatton Estate and the Country Land and Business Association on Natural Capital for Rural Estate Professionals at the end of October.  The latest report from the Natural Capital Committee is an important step forward in defining our rural future – do come and join us to see how this might begin to look on the ground.

 

Natural Capital for rural estate professionals: Cheshire, 31 October 2017

This half day workshop is aimed at rural estate owners, managers and their professional advisers. Our purpose is to look at practical ways in which we can work with current policy and technical thinking about natural capital and ecosystem services. We will hear about some tools that are available to help and will look at a practical case study based on a real private commercial rural estate.

You should end the day with an enhanced understanding of the latest developments in this area and some insights that you can start to apply to your own estates and land. You will also have the opportunity to provide feedback on what you have heard and what you think is needed.

This opportunity is the first of its kind to address these issues from the perspective of a private sector landowner and manager. It is important as we see high level advice to government and future public policy beginning to develop around the natural capital concept.

Programme to include:
• Overview of current issues in rural estate management
• An introduction to tools for scoping, mapping and valuing the benefits of natural capital
• Presentations from tool developers Viridian Logic • The Land App • NaturEtrade
• Small group discussion around a practical example (based on the Tatton Estate with the support of Tatton Estate Management – the largest privately-held estate in East Cheshire)

Organised in collaboration with the CLA, Oxford University, Natural Environment Research Council, Charles Cowap and the Ecosystems Knowledge Network.

Members of the RICS, CLA, CAAV, academics and employees of not for profit organisations can benefit from a discounted admission price.

http://ecosystemsknowledge.net/events/tatton

Registration from 10.45 for an 11.15 start; event closes at 16.30 hrs. RICS Structured CPD hours = up to 5 hrs 15 mins plus further reading etc as appropriate.

Event flyer here

Farming tax breaks: true or false

Saturday’s BC Radio 4 Today programme broadcast an interview with Prof Dieter Helm, the economist who chairs the government’s Natural Capital Committee.  Prof Helm made some cogent points about the ad hoc development of various policies for the agricultural industry, calling farmers subsidy junkies along the way and highlighting ‘exemptions’ from tax.  He particularly mentioned Diesel, Rates and Inheritance Tax.  But is Prof Helm right?  Are farmers treated any differently than the rest of us?

Diesel.  Farmers use so-called Red Diesel in their tractors and other land machinery.  It is red because it has been stained to distinguish it from diesel on which petroleum duties are levied (often called DERV – Diesel Oil for Road Vehicles, Diesel Engined Road Vehicles).  Red diesel is also called Gas Oil.  Farmers must use DERV in vehicles which must travel on public roads a lot for example pick-up trucks, or tractors used extensively on the public road.  Other industries that use diesel engines off the public road also use red diesel, notably the construction industry, quarrying and rail transport.  Boats with diesel engines also use red diesel, whether for commercial or leisure operations.  Customs Officers are regularly to be found at agricultural markets and country shows ‘dipping’ vehicle tanks for the tell-tale red stain.  So no difference here from other industries: we all pay more fuel tax on vehicles which go on the public road but don’t have to pay it on off-road vehicles.  VAT is also payable on fuel and in this respect the farming industry is also no different from other industries.  As an aside, landowners who do not farm are generally unable to reclaim VAT.

Rates:  Farming has been exempt from the general property rate since the 1930’s.  The history of agricultural rating goes back further to the 19th century when farm land was generally subject to a reduced rate.  It is however little known that about 11% of the land area of England and Wales is subject to a rate on farmland, in the form of the rates levied in the Internal Drainage Districts.  These are used to pay for the upkeep of local drainage systems which benefit farmland and other properties in the areas concerned.  Like the rest of us, farmers pay Council Tax on their houses.

Inheritance Tax: Farmers may benefit from Agricultural Property Relief on the value of most of the farm when they die.  For an owner-occupier who satisfies the rules the rate of relief is 100% of the agricultural value of the property, which in practice can be less than its full market value.  So a special concession for farming?  Well no not really.  Other businesses (and indeed farming businesses on their other assets) also qualify for Business Property Relief.  This relief is also set at 100% for most cases and is given against the market value of all the assets used in the business.  The idea behind both reliefs is to keep capital in the business.  For sure, agricultural landowners can also claim a variety of agricultural property relief but the radio remarks were about farmers not landowners.

Business Property Relief has some further surprises.  For example many of the shares quoted on the Alternative Investment Market (AIM) also qualify for 100% Business Property Relief.  Furthermore the income from those same shares is taxed at lower rates of Income Tax than earned income including trade profits: the first £5,000 of dividends are free of any Income Tax, basic rate income tax is levied at 7.5% instead of 20%; higher rate at 32.5% instead of 40% and additional at 38.1% compared with 45%.  Grateful thanks indeed for investors who are willing to invest some capital in AIM stocks and wait for the income and gains to roll in (while of course accepting the risks of losses).

To highlight the comparison, consider £5 million invested in a farm, another business or AIM stocks and shares.  In each case the combination of reliefs could reduce the taxable value of this investment for Inheritance Tax purposes to zero.  Along the way the owner of the shares will pay less Income Tax per pound than either the businessman or the farmer, whose tax bill will be broadly similar at similar levels of profit.  The farmer’s return on his £5 million is however, likely to be considerably lower than either the share owner or the businessman, with or without subsidies.

The interview on Radio Four can be heard at this link for the next 29 days.  It starts at 1 hr 10:03 mins and finishes at 1:20:50.   It’s fairly characteristic of the uninformed and poor insight shown into questions of rural, farming and food policy shown by so much of our public media.  John Humphrys and Radio 4 really should be able to do better, even in just 10 minutes.

–ooOoo–

A few copies of Concise Rural Taxation 2016/17 are still available for any reader whose appetite has been whetted for rural taxation.  See the separate tab for order details, or wait until the autumn for the next edition.

First among equals

The BBC reports today that first class degrees are soaring.  What are employers to make of this?  Does it mean there are more top class graduates than ever?   More committed students?  Better teaching?  Easier assessments?  More teaching to the test?  Dumbing down?  Any, all, or more.  Expect the usual comments, debate and lack of any meaningful conclusions or changes.  Meanwhile how helpful are degree classifications in choosing a new professional trainee in rural surveying or similar professional consultancy work?  The safe answer is probably, not a lot.

There are excellent examples of graduates who are now leading members of their professions, yet showed little inclination or sign of this as undergraduates.  There are also examples of top-class graduates who have made little headway in commercial, professional or for that matter academic life.  And of course there are low grade graduates who have achieved relatively little since and high grade graduates who have indeed gone on to great things.  Firm relationships prove elusive.

How would I address this today if I were recruiting a new professional assistant?  Here are my tips:

  • I would ask to see the profile of final marks they got for all the modules they studied on each year of the course.  This may highlight relative strengths and weaknesses (but don’t be too sure – you may just be looking at normal variations between one subject and another despite increasing attempts to homogenise these profiles).  These profiles are routinely issued to graduates by all universities.
  • Ask the candidates to prepare some work beforehand.  Perhaps an article for the firm’s newsletter of 500 to 1,000 words, on a given topic.  This could even be useful alongside an announcement of the arrival of the new recruit in due course.
  • Warn the candidates they will be asked to advise a client on a particular subject in exam-like conditions as part of the recruitment process.  Provide some warning of the subject, eg contentious rent review on a let farm, claim for a water-pipe burst or something which is relevant to the work they will be doing.  Allow reference material.  Ask the candidates to draft a short email or letter to the client or other party setting out their advice, by hand.
  • Meet the team: but make sure the team is briefed for whatever feedback you want from them on the candidates.
  • Use the interview imaginatively – include a mix of technical and problem-solving questions; ask candidates to perform a task which they might encounter in their working life with you.
  • Try to find the class position of the candidates.  For example in the top 10%, 25%?  On a reasonably sized course this at least gives an idea of relative performance within the cohort.  It’s not information that is routinely issued to graduates nor readily available, but there’s a growing case that it should be – perhaps to the nearest decile for courses with 50 or more graduates, and quartile for smaller courses.

And if you must persevere with placing any reliance on degree classifications it might be worth checking the statistics for yourself.  The Higher Education Statistics Agency produces the data that underpinned the BBC Report, and UniStat can give you information on individual courses at individual universities.  Comparison of classifications is not the only or the most useful way to compare potential graduate employees.

 

Land Management Today

Masthead design

Land Management TODAY – LMT – is published for the first time today.  The first edition is the work of a group of postgraduate students at Harper Adams University who came together at the end of June to study a module called Land Use and Management.  The first edition contains 28 short articles covering a range of topics.  Download your copy of LMT here: Land Management Today July 2017.

Here is the full contents list:

  1. How farming is set to lose its flavour
  2. Buying into Ecosystem Services – whetting the appetite for diversification
  3. Battery storage, the next big thing for energy production?
  4. Branding: Rural Estates in the head and on the ground
  5. Bringing Back Britain’s Trees
  6. Avoiding Failure with Forwards and Futures .
  7. Smother With Cover: black-grass .
  8. A Tale of Two Leys
  9. Will Dairy Cows Ever See a Human?
  10. Conventional v Organic: Breaking Down Barriers
  11. Diversity & Inclusion; The £24 billion boost
  12. Farm smart in the hills
  13. The Drones are Coming
  14. Finding your perfect partner: Relationships not Rules for land tenure success
  15. State Open for Business
  16. Tax simplification; anything but simple
  17. Spring Budget Basics for Taxation on Rural Estates
  18. Brexit for Breakfast
  19. Agricultural Trade: “Preparing for the Worst, Hoping for the Best”
  20. Soil Health Subsidies
  21. Countryside Stewardship Scheme
  22. Telecommunications-The Implications for Rural Land Owners
  23. Telecoms and the Rise of Statutory Powers
  24. Compulsory Purchase: RICS mandates practice with new PS
  25. Make sure you don’t lose out with Business Rates
  26. No Growth in the Greenbelt
  27. Mid-Tier Countryside Stewardship and Capital Grants – are you missing a trick?
  28. H-App-y Maps
  29. Contributor Profiles

This is the first in what we hope will continue as a series of occasional papers on current topics of concern to land management today.

Smallholdings: State of the Nation

The county smallholdings estate is generating an operating surplus of £16.1 million from more than 2,500 farms covering an area of 86,700 hectares let as smallholdings.  In the words of the report from which these data are taken:

Whilst the data set is incomplete this report indicates that council farms continue to play an important role in the tenanted agricultural sector across England covering approximately 86,700 hectares of agricultural land providing approximately 2,583 holdings for around 2,081 tenant farmers. About sixty percent of the lettings are equipped farms (1,536 equipped holdings) and 49 lettings were made to new entrants during 2015/16. The report shows that the reporting smallholding authorities generated a revenue account net surplus of just over £9.5 million in 2015/16.

What more can be gleaned from the 66th Annual Smallholdings Report from Defra? Continue reading “Smallholdings: State of the Nation”