Why stopping super-rich buying land as tax dodge can lead to ‘family farm tax’ compromise

One lesson that my years in government taught me was always to beware of Treasury. They exert more power than any other department – and they are rarely afraid to use it. Any incoming minister should approach them with the utmost caution. They may understand economics, but their grasp of the emotional side to politics is not always as strong.

That means that when Treasury gets it wrong, they really get it wrong. In the October Budget, for rural communities, boy, did they get it wrong – and in particular, in their approach to agricultural relief on inheritance tax. You only need to look at the demonstrations in the streets outside Parliament in recent weeks for that to become clear.

The question is – where do we go from here? This week, the House of Commons Environment, Food and Rural Affairs Select Committee heard public evidence from tax experts, as well as farming and rural representatives.

The latter gave some real-life colour to what the Budget changes mean for farming families and rural communities. It was powerful stuff, particularly in the moving testimony from the English farming union head, Tom Bradshaw.

Farmers protest in Whitehall over planned changes to inheritance tax (Picture: Yui Mok) | PA

Powerful evidence

The raw emotion of his evidence put the party politics into its proper context. It is easy to forget that farming families, like his own, see themselves as being part of a commitment to provide food for their country and stewardship for the land over generations.

The most powerful evidence with which to approach Treasury, meanwhile, came from the panel of tax experts. Jeremy Moody, of the Central Association of Agricultural Advisers (CAAV), has a professional lifetime of dealing with these matters and he deployed that to devastating effect. Lived experience is often the best antidote to Treasury orthodoxy.

There is time still for the policy to be changed and for the worst outcomes to be avoided. This is, after all, a measure which is not due to come into force until April 2026. How do we get to that point? As the saying goes, I would not start from here – but here is where we are.

Right sort of reform

Compromise should not really be as difficult as it has been so far. I am yet to meet a farmer or crofter who is happy about the super-rich buying land for the purpose of tax avoidance. It inflates the price of land and squeezes out people who would use it for food production.

The starting point could perhaps be an acknowledgement from farmers and others that reform to inheritance tax is necessary and possible. Done properly, it could be good for both Treasury and farmers themselves.

The right sort of reform could garner broad support from the farming community. It is not for me to write the government’s policy for them but there is, I suspect, potential in proposals for a “clawback” arrangement, where liability for inheritance tax would crystalise only if the land was sold off after being inherited.

A solution of this sort would protect the ‘genuine’ family farmers – and could actually bring in more tax revenue. The Treasury may not have the strongest grasp on emotion, but if we build them a ladder with facts and figures, they might just use it to climb down from where they are.

Alistair Carmichael is the Scottish Liberal Democrat MP for Orkney and Shetland