It is a bit much to expect Stormont to take a balanced view of inheritance tax. The tax is not devolved so Stormont sees none of the money, at least not directly, yet assembly members still have to listen to their constituents complaining about it.
Nevertheless, Stormont parties could do better than regurgitation alarmist claims by lobby groups. In her budget last week, chancellor Rachel Reeves reintroduced inheritance tax on agricultural property, ending the 100 per cent relief it has enjoyed since 1992. According to a statement issued last Friday by the Ulster Farmers’ Union, this “will devastate countless family-owned farms”.
♦ Subscriber Exclusive: Q&A with columnist Tom Kelly
In the assembly on Monday, the DUP, UUP, Sinn Féin and the TUV fell over themselves to essentially repeat this into the record.
- Newton Emerson: The Treasury tap is back on – but does more money mean more problems for Stormont?Opens in new window
- Newton Emerson: Stormont reform is a goal that could unite us allOpens in new window
- Newton Emerson: Police back-pedalling, Stormont stone-walling and a plague of biting insectsOpens in new window
UUP deputy leader Robbie Butler came closest to a verbatim recital. “The Labour Party has struck a potentially devastating blow to our family farms,” he said.
Later that day, Alliance agriculture minister Andrew Muir told the assembly he had met secretary of state Hilary Benn and asked him to “rethink” this “bad budget for farmers”. Muir said the tax would affect one-third of all farms and three-quarters of dairy farms. Benn said last week it would affect one-quarter of farms.
Read more: Impact of changes to farming inheritance tax: key questions answered
Stormont ministers and assembly members could have put more focus on information and reassurance.
Farmers will still enjoy 50 per cent relief, as they did prior to 1992. This did not cause any apparent harm to family farms or the agriculture industry.
The £1 million tax-free allowance on agricultural property is on top of other inheritance tax allowances, so in reality the threshold is £1.5 million for any individual farmer and between £2m and £3m for a couple.
That puts the average farm in Northern Ireland in the frame, but only just - and average is not typical.
The average farm here has 100 acres, worth £1.4 million at current prices, plus buildings, equipment and any livestock. Around one-third of our 26,000 farms are larger by acreage, which is presumably where Muir’s claim comes from. However, most are not much larger, while the two-thirds that are smaller tend to be a lot smaller.
Read more: Extra cash at Stormont can’t be an excuse to slow reform of public services - The Irish News view
Land size is a flawed way to compare value: a poultry farm can be tiny but worth a fortune, for example. So official figures measure the size of farming businesses by how many people are required to run them. By this measure, Northern Ireland’s farms are far more skewed towards the small. Muir’s department classes 79 per cent as “very small”, meaning they are farmed part time. Another 10 per cent are “small”, requiring one person full-time.
Stormont ministers and assembly members could have put more focus on information and reassurance. Farmers will still enjoy 50 per cent relief, as they did prior to 1992. This did not cause any apparent harm to family farms or the agriculture industry
If you inherit one of the few large farms in Northern Ireland, that does not necessarily mean a large bill. Anything over the tax-free allowance incurs inheritance tax at 20 per cent, half the standard rate, payable over ten years in interest-free instalments. For each £1 additional million, that works out at £20,000 a year for a decade.
Farmers can be asset-rich and income poor, as assembly members pointed out on Monday. Owning a £4 million farm does not guarantee you can pull £20,000 out of a hat. However, it does mean you can readily borrow it to repay over a longer period.
You can avoid inheritance tax altogether by passing your farm on seven years before death, by placing it in a family trust or through other succession planning, provided you and your heirs are actually farming.
Read more: Tension, anger and frustration ‘so tangible’ among farmers after Budget – NFU
Labour’s real target appears to be wealthy individuals buying farmland purely to avoid inheritance tax, which can lead to higher prices and under-use of land. Famously, Jeremy Clarkson claimed he bought his Cotswolds farm partly for this purpose. Taxing such land back onto the market should benefit agriculture and family farms.
There are legitimate concerns with the impact of Reeves’s budget in Northern Ireland.
Land-banking by wealthy tax avoiders may be a lesser problem here, or a non-issue: no figures are available. So we may gain nothing from the cost of fixing it.
Read more: Newton Emerson: Farmers may own the land, but Stormont owns them
Most farmers here own their land, unlike in England, where almost half are tenants. The average price of farmland here is twice as high. A case could be made that we need a higher tax-free allowance.
But it is hard to raise reasonable points with the public, the media and the secretary of state while lobbyists and politicians are squawking like Chicken Little about the sky falling down.
Not for the first time, we could all do with a more nuanced defence of farming interests.