November 22, 2022


It was refreshing to read the recently published report by Baroness Kate Rock; ‘working together for a thriving agricultural tenanted sector’, albeit 116 pages. It considers how changes can be introduced to balance the interests of both landlord and tenant to support a positive relationship and enable the tenanted business to be a success.

I have a personal interest in the report with my husband being a tenant farmer, but it is also important from a professional perspective when advising both tenant farmers and landlords. Although there is a place for shorter-term tenancies in certain situations, gaining the security of a longer-term tenancy facilitates progressive strategic decision making and access to funding. Successful tenant farmers have often been given the freedom and control required to push their businesses forward.

The report recognises that tax is a key driver in landlord behaviours and within the 74 recommendations there are 10 tax related recommendations.

These include the introduction of 100% agricultural property relief (APR) on the agricultural value of the land from day 1 of a tenancy >8 years, with no break clauses for the landlord to be able to shorten it. It also suggests considering business property relief (BPR) as well as APR which could provide relief on the value over and above agricultural value. This really could incentivise landowners to provide longer-term tenancies, especially if the rents received can be treated as trading income for the landlord. To ensure that the tenant is not detrimentally affected, stamp duty land tax (SDLT) also requires a reform as this currently discriminates against longer-term tenancies.

One of the advantages of a shorter-term tenancy is the potential for change of use going forward, whether this be for development or developing habitat. In contemplating how to minimise the loss to tenants the report suggests that the compensation paid be re-examined to provide a fair pay out to the tenant when land is taken for development, together with anti-avoidance to stop the landlord taking the land back in-hand prior to this point.

If land is taken back the report suggests that the landlord should be incentivised to roll the proceeds into other let property through capital gains tax relief. Encouraging both the landlord and the tenant to make significant investments secures the long-term future of the farms and helps to ensure that tenanted farms have viable, up-to-date businesses.

The report considers the future support and funding for agriculture and making the future schemes flexible; perhaps the length of the tenancy or beyond if it is a rolling tenancy or there is further succession. It also makes clear that food security should be an objective alongside the environmental objectives.

It recommends that establishing habitats be treated as trading income with both APR and BPR available from IHT. As it currently stands, land used for environmental purposes may fall outside of the definition of ‘agriculture’, with it potentially (although not tested) breaching the Rules of Good Husbandry. Diversification should be encouraged but consideration needs to be given to the tax implications for the landlord.

In summary the report looks at improving tenant-landlord relationships; aiming to build on collaboration, encourage investment, long-term stability and support successful tenants. All of which should help to minimise losses and have a positive impact on the agricultural sector.


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