Jeremy's Blog 13th December 2024: Inheritance Tax, Capital Grants and Darkening Shadows

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 12th December 2024

The reaction to the Budget continues. A further demonstration yesterday saw Whitehall blocked by tractors, farmers and supporters – later, an evening lone tractor driving down Whitehall made a distinctive sight. Within Parliament, the Commons Northern Ireland Committee, briefed by the CAAV, took evidence on Tuesday and the Environment, Food and Rural Affairs Committee took evidence from myself, the NFU and CLA Presidents, the TFA Chairman and others.

The CAAV is today completing a two week round of technical committees together with the Executive, the Northern Ireland Winter Briefing and the joint conference with Burges Salmon, all with the Budget central to their business. After the work since October 30th in exploring and highlighting issues, these discussions have focused on how members can be supported in their work for clients with:

• the valuation issues, especially for operational farming assets – machinery, live and dead stock, etc - as HMRC’s current advice to use the accounts balance sheet for fully relieved BPR claims will fall away, requiring market value as will be needed for company shares and
• the ways for each farm in its own situation to respond practically to the new environment whether by gifts and restructuring, succession or other planning, in ways that, so far as possible, ensure the health of business without falling into the traps that abound.

Among other steps for members, we intend to cover these issues with a webinar on the morning of 21st January 2025 with details to be circulated shortly and then support with other materials and coverage at the Spring Briefings.

The Inheritance Tax challenge is one among an acceleration of shocks to the sector. As a cautionary warning, DEFRA advised two weeks ago that “the main capital grant offer has temporarily closed to new applications”. Existing application are “on hold for now. You will be contacted in early 2025 with information about what happens next.” This is difficult at several levels:

• the sudden finding of apparently abortive work, time, cost and expectations for farmers and professionals alike, all committed in good faith on the basis of DEFRA’s guidance but now potentially redundant
• that the Government had encouraged applications, implicitly as the pre-Budget language of doom prompted many to apply early and explicitly as increased Environment Agency inspections have pointed to the Capital Grants programme as the means to improve compliance. Those farms now have costly issues without the indicated solution
• a 42 per cent increase in applications cannot have been sudden news in later November yet no use was made of the 6 weeks forewarning process held out by the guide to grants
• the frustration accumulating over preceding weeks at the inaction in processing applications with the RPA, acting for DEFRA, unable to give any explanation. The sense was that the process ran down and had been closed before anything was said in public by DEFRA, making life difficult for public facing officials without a story

After the great improvements in the delivery of schemes in recent years, this is a major setback with signals that shake confidence, damaging the view of future proposals the government may have, such as yesterday’s indication that there are to be answers next year on Higher Tier, transfers from HLS and other matters.

Beyond these issues, the signs are that next year’s Spending Review may well be harsh for DEFRA, neither agriculture nor environment featuring in the priorities set out last week by Keir Starmer. We only have to look at the warnings given with the Budget papers, here perhaps with language and action for once aligning:

• “The government is facing significant funding pressures on flood defences and farm schemes of almost ￡600 million in 2024-25. While the government is meeting those commitments this year, it is necessary to review these plans from 2025-26 to ensure they are affordable.” (Budget Red Book)
• “Farms with greater resources in particular are encouraged to pursue ways to improve productivity and diversify without expecting the same level of direct state support.” (DEFRA Blog)

We may find that this government’s agricultural policy is in plain sight.