Longer tenancies key to agricultural growth, says CAAV

 

Short-term conacre tenancies are holding back farm production and investment in Northern Ireland, but now there is an opportunity for the industry to restructure.

Following the release of John Gilliland’s report on Sustainable Agricultural Land Management on 21 October, Northern Ireland’s agricultural valuers met to consider the full impact of its recommendations. Speaking at the Northern Irish Rural Valuers’ Association (NIRVA) AGM at Dunadry, Antrim, on Friday (4 November), Jeremy Moody, Secretary and Adviser to the Central Association of Agricultural Valuers (CAAV), said the report presented a turning point for the industry.

“Longer term tenancies are key to sustainable growth in Northern Ireland’s agricultural economy, and this report, presented to the Northern Irish Government, truly recognises that,” he said.  “This report sees that the traditional arguments for conacre have fallen away. It does not offer tax advantages, the owner no longer gets CAP payments and the user feels no security.”

The Sustainable Agricultural Land Use Strategy, prepared by a working group and chaired by Dr Gilliland, sets ambitious targets for growth in agricultural production by 2020, requiring investment and good land management. Seasonal conacre agreements, used for almost all of the 28.5% of the province’s farmland that is rented, are identified as a barrier to longer term business planning as they offer no incentive for either the landowner or the farmer to invest in the land.

“The insecurity created by the short 11-month tenancies within the conacre system and their dominance in land rental damages the competitiveness and environmental performance of Northern Ireland agriculture,” said the report.

In contrast, over 35% of the farmland in England was let on longer tenancies, giving a basis for investment, explained Mr Moody.

To help its members and the wider industry, the CAAV with NIRVA has developed a model agricultural tenancy agreement with clauses covering the responsibilities of the parties, compensation for tenants’ improvements and provisions for rent reviews.

“While landowners and their advisers often cite tax advantages as a reason for using conacre, work done by the CAAV – of which NIRVA is a member – has demonstrated that conacre has no tax advantage over land let on longer tenancies, for either Inheritance Tax or Capital Gains Tax,” said Mr Moody.

“We have written confirmation from HMRC that Agricultural Property Relief for Inheritance Tax is available for farmland in Northern Ireland let on any kind of tenancy, confirming our own long-held understanding of the position elsewhere in the United Kingdom.”

With that stumbling block removed, the greatest barrier to uptake of new, longer tenancies was now likely to be the attitudes of landowners themselves, said Dr Gilliland. “Long standing habits must change if there is to be a move to longer term tenancies which offer a greater incentive to tenants to invest in the land and can lead to better returns for both farmers and landowners.”

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Notes

  • The HMRC response to the CAAV included this summary statement “I can therefore confirm that Agricultural Property Relief afforded to qualifying agricultural property let on a tenancy granted on or after 1 September 1995 by section 116(2)(c) of IHTA is not dependent on whether the tenancy is under a code of law, but just has to be tenancy of that property. Such tenancies would include those in Northern Ireland.”
  • That statement would also apply to farmland owned and let out by a UK taxpayer in the Republic of Ireland
  • The CAAV with NIRVA published a full review of issues about the ways to occupy farmland in Northern Ireland last year – Tenancies, Conacre and Licences: Arrangements for Occupying Agricultural Land in Northern Ireland.

For more information contact Jeremy Moody on 01452 831815 or email [email protected].

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