SIMPLE changes to the UK farming sector's tax regime could "make all the difference" to how well it copes with leaving the European single market and the Common Agricultural Policy.

In an effort to open up political thinking to the possibilities of a new fiscal deal for the land-based industries, the Central Association of Agricultural Valuers has produced a discussion paper exploring tax measures that could aid agricultural and environmental productivity.

CAAV secretary and adviser Jeremy Moody said: “Brexit offers the greatest opportunity to determine agricultural policy since 1947, providing the chance to improve the sector that provides much of our food, environment and landscape – such a chance to shape our own destiny may not come again.”

One of the key factors that needs addressing is giving people who want to farm better access to land with which to do so, said Mr Moody: "This involves freeing up more land for rent, as well as ensuring that land farmed in-hand is passed down to the next generation who will farm it best.

“Agriculture, short of physical investment in recent years, is on the cusp of a major technological revolution,” he added. “And with many keen and skilled potential entrants, it is at a point where an improved tax system could yield real dividends.”

He pointed to Ireland's successful introduction of rent relief from Income Tax, geared to length of tenancy, where it has encouraged more letting of land over longer time periods: “We have seen a 30% increase in the number of landlords offering tenancies for five years or more. In conjunction with the new Residential Nil Rate Band Amount for Inheritance Tax, giving relief on a home passed down the family, could have a powerful stimulus as a retirement package.”

To date, UK government tax policy has favoured companies under Corporation Tax, but this had left farming’s sole traders and partnerships behind: “Businesses should be treated equally for what they do, not discriminated against for the way they are structured," asserted Mr Moody.

A fresh wave of investment in farm infrastructure and new technologies is required to boost productivity and business resilience, and the CAAV is arguing for the reinstatement of Agricultural Buildings Allowances to encourage such investment: “To help farmers embrace new technologies there should also be a £2.5m capital allowance for automation and digital technologies over five years," said Mr Moody.

With regard to the environment, the valuers suggested that the carrot of tax breaks might be more effective than the stick of regulation in getting rural businesses to invest in the kind of land management that boosts soil carbon, water storage, and ecosystem health. Looking to the United States, CAAV has proposed some form of 'Natural Capital Allowance' that would enable businesses to claim tax relief on expenditure that enhances the environment.

“By undertaking such comprehensive overhaul of rural policy, the Government can truly create a productive, vibrant farming sector in the future,” said Mr Moody. “We hope that this report will stimulate greater discussion and very much welcome responses to help take this conversation forward.”

For in-depth news and views on Scottish agriculture, see this Friday’s issue of The Scottish Farmer or visit www.thescottishfarmer.co.uk