ALA NI regional coordinator, Peter Brown outlining the facts regarding the true impact that the changes to APR will create for farm families at the UFU organised protest rally at the Eikon Centre on Monday night.
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00:00I sent an email about how long I was to speak for, and the number of minutes was left blank.
00:04The good news is that I wrote two speeches, and this is the shorter one of the two.
00:09I have spent my 30-year career as a solicitor in general practice in market towns in Northern Ireland,
00:15and for ten years now, I'm sure I should confess this, I was a member of the Department's independent review panel.
00:22This does not mean I know anything, never mind everything about farming, nor does it make me a farmer.
00:29But it has instilled in me the belief that a farmer is not something you can actually become, because farmers are born, not made.
00:38Farming is one of a small number of occupations which are a calling to follow, not a career to pursue.
00:45And that is why most governments have used to treat and tax farmers differently,
00:52including devices like Agricultural Property Relief, or APR, on inheritance tax and IHT.
00:59Now, I can see that inheritance tax in general, and APR in particular, were overdue to comprehensive review and possibly significant reform.
01:10The ability of non-farmers to purchase agricultural land, not farm it, and yet still pay the tax rate which was only intended to benefit farmers,
01:21is difficult but not impossible to defend, and even has negative consequences for real farmers like me, by increasing demand for and devaluing agricultural land.
01:33However, rather than a review, or targeted, proportionate, and uncontentious reform,
01:41the Treasury has, without notice or consultation, announced a limit on all APR claims.
01:48The Treasury justification is better targeting these reliefs to make them fairer,
01:54while protecting small family farms, while raising funding for improved public services from the well-based buy-in from estates each year.
02:03Smaller farms comprising three-quarters of APR claims would be unaffected, because based on their innocent unavailable data, their claims would still get through.
02:15Or, as the Deaf Third Minister, Steve Reid, stated, only the richest estates will be asked to pay.
02:22Not small family farms, as some misleading headlines have claimed.
02:27Look at the detail and you will see that the vast majority of farmers will not be affected at all.
02:32They will be able to pass the family farm down to their children, just as previous generations have always done.
02:39This is being portrayed as a Roman food tax, taking from the mega-rich to give to the poor.
02:46So let us look at the detail, to see whether it is the headlines which are misleading,
02:51or it's a minister who less than a year ago said Labour has no intention of changing agricultural property rights.
02:59There are a number of issues.
03:02The Treasury assumes that every APR claim is made by a farmer's estate.
03:07However, not all agricultural land is owned by farmers, and the non-farmers who own agricultural land almost invariably own less land than farmers.
03:17Consequently, a disproportionate number of the three-quarters of smaller unaffected APR claims will be estates of those small-scale landowners,
03:27who do not actually farm the land themselves, not the estates of actual farmers.
03:33Also, the Treasury do not appear to consider the fact that one of the most important and widely used reliefs for all estates, including those of farmers, is spouse relief.
03:43Many farms currently pass an hourly worth card to a striving spouse, which is entitled to 100% spouse relief, and therefore APR doesn't currently need to be claimed.
03:58As the proposed APR £1 million allowances are not transferable, each farming spouse's estate will now have to leave assets to the next generation direct,
04:08not just each other, for both estates to be able to claim APR.
04:13This could therefore almost double the total number and percentage of estates claiming APR, and exceeding the due limits, and therefore allow them to pay an inheritance tax.
04:24For these and other reasons, I believe the Government are wrong about this. This is not to say claim a tax affecting owning the richest estates.
04:34You've already been told that in Northern Ireland, with our lower proportion of tenant farmers, dairy estimated up to one-third of farms and three-quarters of dairy farms would be affected.
04:46Even this is probably an underestimate, because the book value based on farms, which is what this comes from, the Agricultural Census, will be significantly lower than the more comprehensive valuations submitted with IHG returns.
05:01For example, it has been estimated that the average farm in England of around 200 acres, with land valuing £2.25 million with their lower land prices, could face an inheritance tax liability of nearly £435,000,
05:18which could result in the sale of up to 20% of the farm, as it would not be affordable to pay that from current farm incomes.
05:26Even on the Treasury's own figures, the 500 farms paying IHG annually will pay a total of £500 million every year, meaning a very simple mean average IHG bill of £1 million per farm.
05:41All farmers in Northern Ireland need to assume that this could affect them and take advice and plan accordingly. With apologies to the National Lottery, it is not just the richest estates, it could be you.
05:56BBC's Northern Ireland Economics and Business Editor John Campbell told Good Morning Ulster on the morning of the Budget,
06:04What Labour wants to do is, when they are increasing taxes, to the greatest extent possible, have the burden fall on the owners of capital, and to the least extent possible, have the burden fall on people whose only means of support is to go out and sell their labour, which is their definition of working people.
06:24However, taxing capital requires the taxpayer to fund that payment, whether that be through the realisation of that capital by borrowing against it, or liquidating all or part of it, a sale, or from their taxed income, or from some other source.
06:40It is feasible that the estate of a farmer in Northern Ireland who dies eligible for means-tested benefits based on their income, if the means-tested benefits did not take into account their land ownership, benefits like pension credit or housing benefit, could be liable for IHG on the land they own.
07:01If the estate cannot fund this, then it could fall to the beneficiary, who could themselves be eligible for means-tested benefits such as tax credits. The funds therefore may have to come from the sale of part or even all of the land which generates that income, but given the return on their capital, it is not possible, realistically, to pay inheritance tax bills, in most cases, from income only.
07:31In conclusion, the revelation I got for last week, that even they were unaware of these proposed changes until the ninth quarter of the budget, is confirmation of a widely held belief among stakeholders in the agricultural sector that this was, and is, policy on the hoop.
07:49Policy on the hoop rarely needs to intend an outcome, or for that matter, a good outcome, and irrespective of the government's motives, this does not just take from the richest estates. It could impact average family farms, including people with incomes eligible for means-tested benefits.
08:11We face the prospect that a family farm will face a significant tax bill every time it is passed from one generation to the next. In future, it may be possible to avoid or at least minimise the amount of tax actually payable through medium and long-term planning, but that is still unclear.
08:33However, for the current generation of farmers who do not have that option, this will be much more difficult, or potentially completely impossible. There is an old Chinese proverb, give a man a fish, feed him for a day, teach a man to fish, feed him for life.
08:55What if the man's grandfather bought a rod? He taught his son to fish, and his son bought other fishing equipment. But before he gets a chance to pass that rod to his son and teach him to fish, would Robin Hood really take fishing equipment away? That is the prospect that we face. Thank you.