Carmichael warns of “missed opportunities” in farming inheritance tax debate

Orkney and Shetland MP, Alistair Carmichael, has today warned of “missed opportunities” in the debate over inheritance tax on farms, during a debate in the House of Commons. Mr Carmichael spoke in the debate and voted against the government’s taxation plans, but suggested that compromise proposals should be considered which would protect working and family farms but target those who use agricultural land to avoid tax.

Mr Carmichael is also Chair of the Environment, Food and Rural Affairs Select Committee in the House of Commons, and is the partner in a family farm on Islay.

Speaking during the debate, Mr Carmichael said:

“We have all heard of the super-rich buying up land and inflating the price as some sort of tax avoidance measure. I have not met a single working farmer who wants to defend that, so there was a real opportunity to do things differently. 

“DEFRA tells us that there is a 0.5% return on capital. Farmers in my constituency tell me that a £3 million farm will give them an income of about £25,000 a year. 

“The particular opportunity I fear we have missed is that in relation to tenant farmers. The Tenant Farmers Association came up with an excellent proposal, which would reward landlords who grant leases in excess of 10 years with exemption from inheritance tax liability. That would be good for the very people who everybody on both sides of the House says they want to help: the small family farmers.”

Mr Carmichael also commented on suggestions of a compromise on inheritance tax involving a “clawback” by which tax would only be liable if property were sold on after being inherited:

“The idea that is being mooted of a “clawback”—something on which we could see a bit of a sensible discussion and a consensus between the Front Benches—or the idea of a suspended inheritance tax liability which would crystallise only at the point of the land sale after the death of the owner, would both work to keep land in active food production. The irony of the way in which the Government have structured the measure is that, by allowing a 50% relief on farmland above £1 million, the purchase of agricultural land will probably remain an attractive proposition for the super-rich.

“We have reached a point in the debate where we need to broaden it out beyond just inheritance tax, and look at the wider question of farming finance and ask ourselves how we can build a consensus that puts farming and food production at the heart of the countryside, where it truly belongs.”