The Central Association of Agricultural Valuers (CAAV) has said that the spring budget must do more to encourage farm investment.
Chancellor of the Exchequer Jeremy Hunt will present his spring budget to parliament on March 6, 2024.
The CAAV sent a 16-page document to Hunt, urging him to consider a number of proposals which it believes will make farming more productive, efficient and able to adapt to current and future demands.
The nine main 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.
Secretary and adviser to the CAAV, Jeremy Moody, said: “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.
“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.”
Technology and tax
The CAAV said farmers need to be able to invest in new technologies when it is most appropriate to do so, to continue to improve buildings and structures and to 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, Moody said.
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 alternatively be increased in line with inflation, it said.
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,” Moody said.
“Obsolescence is also a factor with new technologies, increasing standards and regulation, and changing equipment.”
Moody also said that, 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,” he said.
Helping farmers adapt
The CAAV said 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,” Moody said.
Investment in environmental improvement works should also qualify, CAAV said, 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,” Moody said.
“Clear and simple stimuli within the tax system can be powerful levers for positive change.”
