The Scottish Land Reform Bill, with its proposed amendments, is likely to affect a greater number of landowners and farmers than initially anticipated.
If the proposed changes to the bill are approved, it means a greater number of farmers will have to spend more time managing their business rather than working in it. For some, the requirement for Land Management Plans will be entirely new.
There are also adjustments proposed for landlords wanting to sell small parcels of land, but the timeframes for selling larger blocks of an estate will be extended, allowing communities more time to register their interest in buying the land. Combined with the potential requirement for lotting, the process of selling estates could take up to a year.
Alongside the UK Government reforms to inheritance tax, farmers across the country are already reassessing their retirement, pensions, and succession plans, and are seeking accurate appraisals of their estate assets to help plan for that retirement and succession.
Land Management Plans – the implications for properties over 1,000 hectares
Proposed amendments to the Scottish Land Reform Bill include cutting the threshold from 3,000 to 1,000 hectares, which means a whole new group of landholdings will be impacted. Land Management Plans (LMPs) will become compulsory, and non-compliance will incur a cost. There is also a proposal to raise the financial penalty limit from £5,000 to £40,000.
For larger estates, the introduction of LMPs means additional work, pulling together and developing plans that already exist. However, for others, especially those on upland hill farms, LMPs will be new.
Businesses who are now required to implement LMP’s are likely to incur costs, including fees for engaging professionals and the time needed to plan and consult in their community. Plans will also need to be regularly updated and republished every five years.
As part of our property management services, we are already supporting clients with their business plans, long term forestry management plans, strategic plans, and succession plans. We would suggest incorporating elements of these into public LMPs that are multipurpose – working for business planning and also ensuring they are easily translatable to fulfil community engagement commitments.
For those new to LMP’s it is important to know that plans need to demonstrate active engagement and cover:
- Long-term vision and objectives for the land.
- Environmental compliance – meeting current regulatory standards.
- Support for Land Rights and Responsibilities.
- Alignment with the Outdoor Access and Deer Management codes.
- Community Consultation – with tenants, crofters, and key community members.
- Transparency regarding the intention to sell land.
Taxing times – Planning for retirement
At the time of writing, we anticipate more tax changes in the Autumn Budget, but the UK Government’s shake-up on inheritance tax already means farmers must look more carefully at making the most of farm income for work-based pension planning, as well as for succession planning or sale of assets. No size fits all as it will depend on aspiration, need, and family circumstances. What is clear, is that inaction will not improve the situation of an individual still owning a farming business in their later years.
Those with the gift of time to save for retirement, can retire and undertake lifetime gifts to the next generation. Hardest hit will be those wanting to stay involved and take drawings – without a pension they can’t afford to ‘retire,’ yet keeping the asset will bring a significant IHT bill for their estate in the future.
If you need support or advice on producing LMPs or advice on planning for retirement, contact D&R Director Niall Milner or our Property Team on 0131 449 6212.
