Farmers Facing Financial Failure

While farmers may be famed for fearing the worst on a variety of commercial issues - it has been claimed that a shock tax ruling could wipe out many traditional Ulster farms within a generation.

The decision this week by 'special commissioners', who rule on tax law, could mean that inheritance tax is charged on many farmers who let land 'in conacre' which has commercial development potential.

Framers are worried because the conacre system - which is unique to Ireland - sees around a third of all farmland in Northern Ireland let informally to farmers in this way - often from 20 to 30-acre farms now too small to be commercially viable.

Concern is mounting that the ruling could pave the way to even more aggressive inheritance tax across much broader categories of conacre farmland, regardless of development potential.

At present, such land enjoys inheritance tax exemptions.

Now, thousands of acres of land let in conacre, which would normally be inherited tax-free, could be subject to up to 40% inheritance tax when it passes to the next generation, prompting massive numbers of farm landowners to sell-up before the deadline.

Her Majesty's Revenue and Customs has historically accepted that agricultural land let informally to other farmers 'in conacre' was part of normal farming, but this week's ruling by the UK Special Commissioners of Income Tax, taken independently of HMRC, overturned this view and now land let in this way is to be reclassified as an investment activity.

One expert said: "I believe we could be looking at a situation where many traditional Ulster family farms could be taxed out of existence within a generation.

"They could have to be sold to pay inheritance tax."

However, there have been suggestions the move is to block wealthy investors buying up farms to avoid inheritance tax, but one analyst said the number of such investors are very few and that drawing up guidance to exempt family farms would be straightforward.

Ulster Farmers Union President Clarke Black said his group was taking the matter "very, very seriously".

"We are concerned about the impact of this ruling and are considering an appeal against the principle," he said.

"Because it is a new and complex ruling nobody knows the extent to which it could be applied."

(BMcC)