Agricultural Property Relief

Jim Shannon Excerpts

Tuesday 28th January 2025 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

On a point of clarification, Mr Stringer, I understand that the Front-Bench speeches will begin at 3.28 pm. Does that mean that the hon. Member for Tiverton and Minehead (Rachel Gilmour) and myself can divide the 17 minutes until then between ourselves?

[Graham Stringer (in the Chair)]

On the time limit that I have set, if people took the four minutes, we would finish the Back-Bench speeches at 3.19 pm. One of the problems is that some people have put in to speak but are not standing. That made the calculation difficult, because I assumed that people who had put in to speak would be bobbing, and they have not. At the moment, I will go with the four minutes that we have agreed.

[Jim Shannon]

Thank you for that clarification, Mr Stringer. I did not intend to put you under any pressure. I wish you well and thank you for your chairship.

I thank the hon. Member for Caerfyrddin (Ann Davies) —I hope my pronunciation is right, with my Ulster Scots accent—for securing this important debate on a matter of grave concern for many constituents and communities across the United Kingdom, and for those that I proudly represent as the Member of Parliament for Strangford. I declare an interest as a member of the Ulster Farmers’ Union, a farmer and a landowner. All my neighbours—every one of them—are concerned about this issue, and they have expressed that to me very clearly.

Farmers are the backbone of our rural economy. Their work provides not only the food that graces our tables but the stewardship of our natural landscapes, which are an integral part of our cultural and environmental heritage. Yet the changes to APR threaten to destabilise that foundation. I have spoken to farmers in my constituency and beyond, and their message is clear: the changes will place a substantial financial burden on farming families, forcing many to sell land to cover tax liabilities.

In response to a survey by the Country Land and Business Association, 86% of farmers indicated that they would need to sell all or part of their land if APR were removed. I understand that approximately 70% of farms in Northern Ireland—that comes from the Ulster Farmers’ Union legal officer—will be affected, because the farms are smaller.

It is really important that we get this right. Farmers have faced unrelenting challenges in recent years, including soaring energy and fertiliser costs, unpredictable weather patterns and inflationary pressures. The past decade has been marked by uncertainty. The loss of APR would mean that future generations could face unsurmountable inheritance tax. For smaller farms, especially, that could spell the end of their viability. The reality is that the changes will sweep up in their net many genuine, hard-working family farms. It is not just a financial issue; it is a matter of fairness, community sustainability and food security.

The Minister is an honourable person, but let us be honest and reasonable: what is right and what is wrong? Justice is what we are looking for here, and that must be addressed. When global supply chains are increasingly fragile, it is unwise to undermine domestic food production. Every acre lost to inheritance tax obligations reduces our ability to feed our population sustainably and affordably.

[Alison Bennett (Mid Sussex) (LD)]

Clearly, many Members on both sides of the Chamber are incredibly concerned by the Government’s proposals to cut agricultural property relief and business property relief. Farmers from my constituency came to see me and they are incredibly worried. In an area with high land values but relatively small farms, they think that they will lose their farms. Does the hon. Member agree that, as well as having a global impact, losing those farms will be incredibly detrimental to the rural economy—to veterinary practices, agricultural merchants and other businesses attached to farming?

[Jim Shannon]

I thank the hon. Lady for that intervention. With those wise words, she has hit the nail on the head. When the Minister looks round this Chamber, he will see that everybody—those who have spoken and those who are here—is united against the change to APR. We are not going to put the Minister under pressure unduly, but if it were me, I would think twice about getting into a fight where it was 27 to one.

[Jamie Stone]

The hon. Member will be aware that my wife’s family come from Northern Ireland. My understanding is that the price of land there is quite a lot higher per acre than in Scotland or England. Does that not mean that what we are talking about today has a disproportionate effect on the Province of Northern Ireland?

[Jim Shannon]

It certainly does. For the Minister, we will lay on the line what we are after. The £1 million threshold is wrong, because it does not adequately reflect the rateable value of a farm. If the threshold was £5 million, that would save the small farms. The hon. Member for Caerfyrddin, who introduced the debate, talked about solutions. I have a solution for the Labour party, and I do not care if the Labour party claims it—that does not matter to me. What matters to me is that the threshold should rise from £1 million to £5 million. If it does, family farms will be saved, and if they are saved, we have a chance of moving forward.

I am trying to put that forward to the Minister as a positive solution. With the Ulster Farmers Union representatives William Irvine and Alex Kinnear, I had a meeting with the Minister away back before Christmas. We put that solution to him, and he said that he would take it to the Chancellor, because ultimately it will be her decision. It is a really clear way forward.

The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) is right in what he says about Northern Ireland. Land values are more expensive in Northern Ireland than anywhere else, which is why the 70% figure is greater for Northern Ireland than anywhere else. We want to have the same mechanism for everybody across this great United Kingdom of Great Britain and Northern Ireland, but there are other ideas about mechanisms such as extended payment windows or graduated tax liabilities to alleviate the financial strain on small farms.

I urge the Minister to provide clarity and reassurance to farmers, who are deeply concerned about the future. Again, I say this to him: if we want to do something positive following this debate—as I think we can and must—the issue of the threshold is the way forward. When people add up the value of the land, the value of the machinery and the value of the stock, they are well over the £1 million threshold, but what if he made the threshold £5 million? I have not grasped that figure out of the air; the Ulster Farmers Union and the National Farmers Union put it forward as a figure that could address the issue.

I am not going to put a lot of pressure on the Minister today—well, actually, I am. We are all putting pressure on him, because we see a way forward—genuinely, constructively and positively. I beseech him to take that message from the debate today to increase the threshold and save family farms.

This is an issue across Northern Ireland, including in the constituencies that my hon. Friend the Member for Upper Bann (Carla Lockhart) and I represent. All my neighbours are worried sick about what the future holds, as are those tenant farmers in Wales and Scotland—across this great United Kingdom. We need the threshold to be raised. If the Minister does that, we will be on his side.

--- Later in debate ---

[Torsten Bell]

I will make some progress and then I will give way.

We see a similar picture for business property relief. It is in large part these reliefs that mean the largest estates pay materially lower rates of inheritance tax than more modest estates. That undermines faith in the fairness of our tax system more generally. Given the pressures we face, it cannot be right to leave this system unreformed, which is a point the hon. Member for Waveney Valley (Adrian Ramsay) made well.

That is the context and the rationale for the changes to how we will target agricultural property relief and business property relief from April 2026. Contrary to the claims that these reliefs are being scrapped, which I am afraid to say were repeated by the hon. Member for Strangford (Jim Shannon) just now, we will continue to provide significant tax relief, including for small farms and businesses. Individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets. Importantly, the relief sits on top of all the other spousal exemption and nil-rate bands. Depending on people’s circumstances, up to £3 million can be passed on by a couple to their children or grandchildren free of inheritance tax.

[Jim Shannon]

I will try to be brief. On the rateable value, which the Minister mentioned earlier, my understanding after talking to the legal person of the Ulster Farmers’ Union is that the rateable value is based on whether the farm was handed over in the 1970s, in the 1980s, in the 1990s or even in the 2000s, but the rateable value does not show the real value of the land. Therefore, it is a flawed system. If it is a flawed system, the Minister needs to go back to the very beginning and look at it. I say that respectfully; I am not trying to catch anybody out. I am just saying that if something is not right, then get it right.

[Torsten Bell]

The point I was making was about the hon. Member’s point that the relief had been scrapped; I was just making the point that the reliefs have certainly not been scrapped and that they remain very generous indeed.

Beyond the thresholds I mentioned, the 50% relief will continue and there will be a reduced marginal inheritance tax rate of 20%, rather than the standard 40%. Furthermore, in response to the points raised by several Members today about the cash-flow challenges that some farms face, particularly after bad years like last year, I will point out that heirs can spread the payments over 10 years interest-free, which is a benefit that is not seen anywhere else in the inheritance tax system.