Beware stealth taxation

Make no mistake, it is the middle-class farming families who will be targeted, and many of the principles for passing on property from one generation to another, and which have held firm for so long, will be swept away.

I remember the old Estate Duty, which 50 years ago wreaked havoc with many of our country estates and destroyed their structure. These new laws have a hollow echo about them.

Much of the problem has been brought about by the unprecedented rise in house values, which has taken the majority of homes beyond the £250,000 threshold for paying Inheritance Tax. If you wish to pass the family home onto the next generation, and it is worth more than £250,000, then that event will give rise to a liability for Inheritance Tax.

Gordon Brown could have softened the impact by increasing the tax threshold, but he has carefully kept these increases down to the rate of inflation and, since New Labour took over, the tax-free element of our estates has only lifted by some £30,000.

Against this back-cloth, the chancellor is introducing several measures which will affect the rural property owner on three fronts:

Firstly, they are attacking the agricultural property relief that has hitherto been available on our farm houses.

The revenue officials are arguing that a lot of farmhouses are too grand to be accepted as appropriate for agricultural use, and that the premium above their perceived agricultural value will be chargeable to tax. They are suggesting that there should be a presumption that the farmhouse is subject to an occupancy restriction for agricultural purposes and, as such, up to a third of its value should be taken out of the relief provisions.

The district valuer holds the view that this should apply to any property within commuting distance of an urban population, or that lies in an area where holiday homes may be bought.

These parameters, if accepted, take in nearly every home in the British Isles!

The second battlefield is more serious, because it involves retrospective legislation which, up to now, has been considered against the ground rules.

For over 20 years, families have gifted property to the next generation with any Capital Gains Tax liability quite legally held over until there is a further change of ownership.

The proposed new law will remove this concession and make the event liable to Capital Gains Tax whenever property is gifted; and the worst sting in the tail is that this will apply to transactions in the past going back 20 years.

The third prong of the chancellor's attack also has retrospective implications and will affect a lot of farming families.

The proposals are ostensibly introduced to counter "sophisticated inheritance tax avoidance schemes" but, in practice, a lot of innocent farming families will be caught in the net.

For example, if parents gift their family farm to the children and remain with them in the farming partnership, then they must pay an economic rent to the children for the continuing use of the land that has been given away. If they fail to do so, then the partnership will be subject to an annual income tax charge equivalent to the amount of rent.

Clearly there is a lot of flesh to be put on the bones rattled by Gordon Brown last month, but it is dangerous ground, and most of us will have to look seriously at our estate planning over the coming months.

In 1992, BSE was rampant, with just short of 1,000 cases per week being discovered, and it makes this week's news the sweeter when we are told that the first three months in 2004 have seen only 50 reported cases in the UK.

In comparable terms, it means we are now on a par with our European neighbours - Ireland has 46 cases, Spain 25, Germany and France 19 each. We are now well below the EU threshold for medium-risk BSE status, and yet none of our cattle over 30 months of age are allowed into the food chain. The OTM scheme continues to cost the country around £350m per annum and cannot be justified any longer.

The stumbling block, as I have mentioned before, is our own department of health which, for reasons best known to itself, continues to query the safety of British beef.

My remedy would be to tell them that if they want to continue the ban, then it should come out of their budget, and not ours.

Most level-headed industry forecasters think that our older cattle will start coming back into the food chain early next year.

I often think that our industry is the most persecuted with red tape, but a letter in a medical journal this month gives some comfort, with a fellow sufferer's tale. After the writer's first six months as a consultant surgeon, he had many new insights into how the NHS works, or doesn't!

His experiences are best illustrated by the story of a boat race between a Japanese rowing crew and an NHS team. The Japanese won by a mile and the senior NHS managers set up a working party to discover the reasons.

They concluded that the Japanese had eight people rowing their boat and one steering; while the NHS team had eight steering and one rowing.

The working party immediately hired a consultancy to look at the team's structure. Millions of pounds and several months later, the consultants reported that too many people were steering and not enough were rowing.

To avoid losing again, the team structure was changed to include three assistant steering managers, three steering managers, one executive steering manager, and a director of steering services. As far as the person rowing the boat was concerned, a performance and appraisal system was set up to give him more incentive to work harder.

In the second challenge race, the Japanese won by two miles; and the NHS managers responded by laying off the rower, selling the oar, cancelling orders for a new boat, and with the money saved they financed pay awards for the steering group!

We all know how he feels!

I see on the DEFRA website there is a consultation paper on the cross-compliance rules for the mid-term review, and it should be compulsory reading for every farmer.

Although I have managed to view the document, I cannot at the minute extract it from the website where it remains firmly attached.

Nevertheless, it is important and one to which we all ought to respond by the closing date of June 20. By next week, I will make sure I get a copy and give you a few extracts.

After considering a host of unnecessary and unwieldy options, DEFRA has announced that the "additional payment element of the Dairy Premium" will be dealt with as a straightforward top-up and on the same basis as the main premium.

This means that the total Dairy Premium will add up to around 0.85p per litre of milk quota held.

I heard this one on the radio and felt the urge to pass it on.

How can you tell the difference between a coconut and a Yorkshire man?

You can get a drink out of a coconut!

Forward on April 20 were 200 cattle including 60 bulls and 18 cows; 4,482 sheep including 410 lambs and 585 ewes.

Light steers to 114p from L Thompson & Son, Fimber (average 111.5p). Medium steers to 137p from J L Gray, Grindale (117p). Heavy steers to 130p from J L Gray (101.9p). Light heifers to 126p from A W Scarborough, Sutton-on-Forest. Medium heifers to 140p from A W Scarborough (114.5p). Heavy heifers to 138p from G I Marwood, Harome (105.7p). Medium bulls to 116p from J D Lumley, Aislaby (103.2p). Heavy bulls to 118p from T D Butterworth, North Grimston (103.9p0. Black & white bulls to 94p from P R Dickinson, Suffield (85.2p).

Standard lambs to 185.7p from F Harland, Knapton (166p). Medium lambs to 104.5p from R Chambers, Hutton Cranswick (161.3p). Heavy lambs to 145.8p from F J Hodsman & Sons, Eddlethorpe, (145.8p). Light hoggs to 156.6p from P R Ball, Seaton (141.7p). Standard hoggs to 145.9p from G C Lee & Son, Loversall (135.2p). Medium hoggs to 148.7p from R T Ward, Allerston (135.3p). Heavy hoggs to 141.3p from J Waind, Brawby (125.4p). Overweight hoggs to 128.3p from K Kirby & Son, Ebberston (116.5p). Ewes to £88 from M T Bulmer, Salton (£61.70).

Updated: 11:21 Wednesday, April 21, 2004