06.Sep.2018

Increasing availability of farmland to new entrants

As part of their research on the sustainable use of land and natural resources, the James Hutton Institute has published its report prepared for the Scottish Land Commission, entitled “Increasing the availability of Farmland for new entrants to agriculture in Scotland”. 

The report's aim was to identify ways of achieving one of the Commission’s Strategic Plan objectives: to increase access to land for those who wish to farm.

Identifying obstacles and solutions for new entrants

The report recognises a variety of problems for those who wish to access to land, such as:

the price of UK agricultural land is often higher than the return for agricultural production;

long-term occupancy by the same family can make crofters and farmers reluctant to release their properties; and

potential new entrants may be reluctant to move to remote areas.

The report explores various models for access that could help overcome these barriers, largely based on the European Commission report: New Entrants to Farming.

The James Hutton Institute’s report focuses on four main options.

Joint ventures

The Scottish Law Commission seeks to increase the “number of agricultural units managed through a lease or joint venture” in its Strategic Plan. It is hoped that use of these will help the Commission to achieve its objectives and provide a way for new entrants to enter the farming sector.

The report looks at three models:

Contract farming: The landowner outsources the operational activities on an area of ground to a third party or "contractor". A new entrant can be the contractor, which would give them access to land for farming, and also benefit from the experience of the existing farmer.

Partnerships: A new entrant can partner with an existing farmer and contribute towards the same farming business. The existing landowner would typically put in the capital assets, and the entrant new labour and knowledge.

Share farming: Parties would work on a farm together, even using similar resources, but operate as independent businesses.

Tax intervention

As things currently stand, owner-occupier farmers must pay the usual UK taxes, e.g. income tax, corporation tax and capital gains tax. Entrants seeking to access the farming industry may be faced with additional tax costs, such as sporting rates on land with potential for use for sporting, and also significant Land and Buildings Transaction Tax costs.

The report proposes a number of tax interventions to assist new entrants, including:

relief from Income Tax for certain agricultural tenancies, e.g. where the tenant is not related to the owner; and

tax relief on retirement to encourage the transfer of farmland. 

Land Matching Service

The costs related to buying land are often a prohibitive factor for new entrants. Under a Land Matching Service, individuals who are offering land for sale would be paired with those who are seeking to buy land. 

Landowners offering land can benefit as they may wish to use their land, but not undertake farming activities; or alternatively want to diversify their business.

The report recognises that for such a scheme to work it must be delivered in a structured way. It also identifies that training and support may be necessary during the course of any relationship. It also acknowledges that the service may not be commercially viable in its early years, and a range of funding options may be necessary to get it started.

Incubating new farming business

This model involves agricultural land being given to an individual, with support and training. It is based on business incubator models, where organisations offer office space, and often financial support and training, to start-ups.

The report comments that these services can be provided by the public, private and charitable organisations. There are currently regimes in place, such as a land trust, where one party holds land for the benefit of another, increasingly in environmentally friendly ways. What distinguishes a land trust from a farming incubator is the latter provides training and even some form of financial assistance.

The report has received a positive response from organisations within the industry. Scottish Land & Estates view the report as another positive step towards creating a thriving tenanted sector in Scotland by offering flexible alternatives, or additional opportunities, for both landlords and tenants.

The National Farmers Union of Scotland (NFUS) have committed to building on the findings outlined in the report.  Already, NFUS and Scotland’s Farm Advisory Service are to host a series of workshops about the options available to new entrants to further explore and develop the models outlined in the report.

In light of the difficulties facing new entrants, further developing the models proposed in the report is a step forward in trying to make land more accessible. A legal and political environment that creates a more co-operative approach to land use, between those who own land and those who have the skills and enterprise to work the land, can only be a welcome development to achieve a healthy, sustainable rural Scotland.

 

If you have any queries about the proposals to encourage new entrants to farming, please contact a member of our Rural Property and Business team, or your usual Shepherd and Wedderburn contact.

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