Jeremy Moody has written to Laura Webster at HM Treasury, titled Budget proposals for APR and BPR – impact on Scottish agricultural tenancies.

I write following a meeting in Edinburgh this morning of Scotland’s Tenant Farming Advisory Forum (TFAF) and, with the support of the Forum (members listed below), identified very considerable concerns about the impact of the Budget’s proposed changes on Scottish agricultural tenancies, notably but not only the 4000 or so under Agricultural Holdings (Scotland) Act 1991.

We ask that this letter and its concerns bearing on up to 1,700,000 acres of Scottish farmland be passed to the Exchequer Secretary to the Treasury. At the request of TFAF, comprising the relevant farming, landowning and professional bodies chaired by the Tenant Farming Commissioner, I am writing immediately after its meeting to enlarge on references I have previously made in our meetings.

These tenants would face the prospect of a very substantial financial liability on the implied value of their tenancy, rarely readily disposable for money in whole and never in part. The problem arises because a 1991 Act tenancy does not die with the tenant but has provisions for succession within the family by bequest legal process. This is a particular result of Scottish land and agricultural law giving a much greater and disproportionate impact of these changes on agricultural tenants in Scotland, and so on Scotland’s rural economy.

Case law on this was developing in the 1980s and early 1990s with the inheritance tax cases Baird and Walton (followed by the partnership case (Greenbank v Pickles) which confirmed that, in such circumstances, such tenancies have a value. However, the leading cases were only decided just after the move to full relief in 1992 and so were not followed through then but would be now.

That value can be substantial. Present indications are that, for a typical lowland Scottish tenancy, the £1m band for full relief might be crossed on perhaps as little as 300 acres, before considering the value of livestock, machinery, and other assets.

While an owner-occupier can sell part of the farm to pay the tax, not only does the agricultural tenant have no equivalent option but has no means to insist on being paid value to surrender the tenancy. Equally, the tenant cannot borrow against the security of the tenancy: lenders will not accept the pledge. The tax would simply have to be paid with the money found at the time or over the following 10 years – in addition to the rent.

The TFAF meeting asked me to stress to you and the Exchequer Secretary the significance of this demand on many Scottish agricultural tenants. I, the TFAF members, and TFAF itself will then set the issue out more fully to follow up this initial letter.

Yours sincerely

Jeremy Moody, Secretary and adviser, Central Association of Agricultural Valuers