In a wide-ranging discussion document published last month the Country Landowners Association is putting forward a radical new basis for taxation. The working party responsible for the report, which was chaired by Sir Michael Bunbury, argues the case for an alternative fiscal approach “which is attuned to the economic facts of a rural landowner’s life in the year 2000 rather than in the year 1800”.
Underlying the detail of the report are three main lines of reasoning:
- The current “schedular” system of taxation fails to recognise that the business of rural land ownership is frequently an amalgam of interdependent enterprises, some of which would not be viable in isolation.
- The schedular system tends to distort landowners’ decision-taking on business diversification, and encourages them to invest according to archaic and artificial rules rather than for sound economic considerations.
- To overcome the problem, the Inland Revenue should adopt an alternative approach which gathers together a landowner’s various enterprises and taxes them together as a single “rural business unit”.
The report gains particular relevance from the current emphasis on the need for both diversification into other enterprises and the protection of the environment. “Modern rural estates are very varied in their character,” comments Sir Michael Bunbury.
Income from the owner’s farm may be supplemented by rental income from tenanted farms, income from woodland, sporting rights, farm shops, residential lettings or a host of other sources including mineral extraction.
“Each of these various business activities is currently subject to different tax treatment as a result of the schedular system. This means different payment dates, different tax assessment procedures, and different rules for expenses, capital allowances, exemptions and reliefs. There are many other complications too, such as inheritance tax reliefs and capital gains tax rollover relief.
The CLA’s objective is a simplified method of taxation which would produce a more buoyant rural economy and new jobs in the countryside, and it views the report as a “green paper” to stimulate discussion.
