Farmers are facing a ‘triple whammy’ with the closure of the sustainable farm incentive (SFI) scheme, the proposed changes to legislation around compulsory purchase orders (CPO), and the proposed farm inheritance tax.
Director of rural consultancy Stoneacre Advisors, Matt Sudlow, said: “Farming faces a triple whammy that will push many farmers and landowners into making some difficult decisions.
“The abrupt closure of the SFI applications is a huge shock. Many farmers were relying on SFI payments as a revenue stream and it’s just going to pile on even more pressure.
“In the meantime, there is the prospect of compulsory purchase orders becoming more aggressive and the likely removal of hope value in forced acquisitions.
“This is against a backdrop where landowners are already struggling to work out how to manage inheritance tax challenges with the changing treatment of reliefs,” he added.
SFI
The Department of Food, Environment and Rural Affairs (Defra) announced on Tuesday, March 11 that the SFI schemes budget had been allocated and it would no longer be accepting new applications.
Defra said a reformed SFI scheme, with a budget to be confirmed in the Spending Review this summer will direct funding where there is greatest potential to do more on nature.
The sudden closure of the scheme has sparked anger among farmers and politicians.
CPO
The Planning and Infrastructure Bill had its first reading in the commons on Tuesday, March 11. It contains a number of proposed changes to planning legislation including in relation to CPO.
The proposed changes will give councils and bodies like the NHS or Homes England greater powers to use CPO to acquire land in rural areas.
The bill also extends an existing power to remove value attributed to the prospect of planning permissions, or ‘hope value’.
This means the land could be sold at its current valuation as arable agricultural land, and not land that is set for development, meaning farmers and landowners could receive a lower price.
Inheritance Tax
In the autumn 2024 budget the government announced reform to the agricultural property relief (APR) and business property relief (BPR) from inheritance tax.
From April 2026, the proposed changes to inheritance laws mean that agricultural assets worth £1 million pounds which were previously exempt will now be taxed at 20%. The tax would be payable in installments over 10 years.
The changes have spurred protests from farmers and landowners all over the UK including a recent pancake day rally in London.
Sudlow said: “With changes to IHT, the SFI and CPOs, on top of two poor harvests, the removal of the Basic Payment Scheme (BPS) and rising input costs, the outlook for farmers has fundamentally shifted.
“If farmers had sat down two years ago and worked out their worst-case scenario, it would be hard to imagine anything as challenging as this.
“It will sadly push more and more people to the edge of having to sell some or all of their land holdings,” he said.
