Some Experts Consider England’s Farmland a Tax Haven: Discover Why
When most people imagine a tax haven, they think of an overseas territory where companies and individuals hide their funds to pay a lower tax rate. While that is the traditional definition of a tax haven, some experts recently pointed out that the farmland in England also serves as a tax haven, but in a unique way.
People Need Nature’s Report
The recent discussion regarding whether England’s farmland could be considered a tax haven comes from a report released by People Need Nature. This report took an in-depth look at the impact of taxes and the tax system itself on farmland. The report includes a plethora of seemingly odd tax breaks that farmers and landowners can take advantage of.
According to the report, English landowners receive tax breaks of £2.4 billion each year. In return, they provide almost no benefits to the general society. Furthermore, they also receive £2.5 billion annually in EU subsidies, something which has been under scrutiny for a long time and is in the process of being reformed.
Looking at the Tax Breaks
When examining the tax breaks that farmers and landowners in England enjoy, remember that three-quarters of the country’s land is farmland. There is still a significant amount of subsidy money that farmers receive just because they own their land. This may change in the future with a new Agriculture Bill that will instead offer subsidies when they provide public benefits. Those benefits could include sustaining extremely rural areas, storing carbon to fight climate change, helping preserve wildlife, or reducing urban flooding. However, the passing of that bill is yet to progress as it is stuck in parliament.
In addition to the subsidies, there are three main tax breaks that the People Need Nature reported, all of which contribute to the idea of farmland being a tax haven. Red Diesel duties are just a fifth of that for normal diesel, saving farmers in the UK around £1 billion each year and £550 million annually just in England.
Business Rates Exemptions are another key factor here, as farm buildings and farmland are not covered by business rates. Estimates indicate this adds up to around £1 billion annually in potential tax savings. That exemption does not even have any conditions.
Finally, the Inheritance Tax exemption or Agricultural Property Relief applies when the owner dies. This tax benefit is harder to pinpoint in numbers since it is more specific, but estimates indicate that 62 percent of the Agricultural Property Relief in a single year only went to 261 families. Estimates place the lost taxes between £700 and £800 million annually.
Just a handful of the other tax breaks that farmers can find include Road and Tax or MOTs exemptions for farm vehicles, rollover relief on the Capital Gains Tax, and VAT exemptions.
How These Breaks Turn the Farmland Into a Tax Haven
Since those tax breaks are designed to help farmers, it may cause some to wonder how this translates into a tax haven. That comes from the formation of a mini-industry of tax consultants, land agents, and tax accountants. High net worth individuals can invest in farmland and take advantage of these tax breaks, getting some benefits of a tax haven without the critiques or stigma.
In fact, it was revealed in a recent book that 50 percent of England is under the ownership of just 25,000 people. To make it worse, from 2004 to 2015, offshore entities bought 280,000 acres of land. That translates to around £50 million in annual farm subsidies heading offshore.
Additionally, when there are people who own and operate smaller farms, they do not receive as much benefit from the tax breaks as larger farms. In fact, many small farmers oppose some of the current tax breaks for farmers, preferring alternative taxation options.
This debate regarding England’s farmland goes to show that tax havens can come in unexpected forms.
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