SIR, Auchtertyre is a stock-rearing farm that has been owned and occupied by four generations of my family since 1897.

According to DEFRA, the Return on Capital Employed (ROCE) of an average farm in England is around 0.5% of the combined value of land, machinery, stock, etc. employed in the farming enterprise. I couldn’t find a comparable figure in Scotland, but it is unlikely to be any higher, and this compares with a typical ROCE of between 5% and 10% to be expected from most other commercial business enterprises.

The main element responsible for this patently dire performance is the grossly inflated value of agricultural land, which nevertheless is the value on which Agricultural Relief from inheritance tax is based, and which has been driven to these levels by the efforts of multi-millionaires, with more money than they know what to do with, who are more concerned with avoiding tax than whether or not an investment in agriculture produces a realistic return.

In an effort to supplement the family income, my father was persuaded to diversify by planting up an area of unproductive open heather hill with commercial conifers. Over the years, the woodlands have shown a steadily decreasing ROCE to just 0.2% from an asset having a similarly grossly inflated value for the same reasons, and which is also the basis for assessing Business Relief from inheritance tax.

The latest attempt to tinker with the system by reducing the threshold for tax relief does nothing to address the problem of inflated land values, although it may well result in unintended consequences for the chancellor if it discourages wealthy investors from using this tax avoidance route altogether, and thereby perhaps brings market values down to a more realistic level.

Andrew Yool, Auchtertyre, Pluscarden, Elgin