The Land Reform Review Group report released last Friday is substantial and wide-ranging.
While many of the recommendations are unlikely to affect most ordinary land-based businesses, there are several important points which, if adopted, will affect every farmer and other rural business in the land.
Three of the key ones are proposed changes on taxation, succession law and agricultural leases.
Tax changes
The report questions why agriculture, forestry and other land-based businesses should be excluded from paying rates, partly because the exemption has the effect of, as the LRRG sees it, increasing the price of land.
The group also question the abolition of sporting rates.
One suggestion is that landowners might only have to pay sporting rates if they had failed to cull a high enough number of deer on their ground.
The LRRG also recommends consideration of the introduction of a land value tax. The concept of this is that the tax is on the site value of the land (but not any building on it), treated independently from the activities carried on there.
This tax would not go up if the site were developed, but is intended to capture any benefits arising from public investment for example, the provision of new sewers or an improved road network.
In relation to national taxation, the review group challenges the existing reliefs from inheritance tax for agricultural and business property.
It also questions the availability of ‘roll over’ relief from capital gains tax.
The existence of these reliefs also, it believes, increases the price of land because it reduces the amount of tax that has to be paid from it.
A reintroduction of inheritance tax on farms in some form would make a significant difference to all farming businesses, even if that tax were payable by instalments.
Succession law changes
To understand this, remember that in Scotland the law gives a person’s spouse and descendants certain automatic rights of inheritance which cannot be got around by their will.
In Scotland at present, the value of land and buildings which somebody owns when they die does not have to contribute any share of the ‘legal rights’ which the family can claim; the LRRG thinks they should.
If this were brought in, all the owners of rural businesses would need to reconsider their wills.
Agricultural leases
A major, but relatively simple, change suggested in the report affects the 1991 Act tenant’s ‘right to buy’.
As the rule stands, such tenants have to register in order to be entitled to exercise their right to buy.
The proposal is that such registration should become automatic.
The LRRG also generally supports an enhanced right to buy, and suggests it would be a good thing if more traditional tenants owned their farms.
Another review group is now working on the Agricultural Holdings Legislation and is due to report soon.
There is a great deal more in the LRRG report than these items. However, if the rules on these topics were changed, they would have a profound effect on every rural business in the country. The message must be “watch this space”.
* By Mike Blair, partner, land and rural business team at solicitors Gillespie Macandrew.