2 The TRIG Reform Proposals

1.33 The first TRIG Report was published in 2003, and made seven recommendations for changes in existing legislation. The proposals included a number of technical amendments to both the Agricultural Holdings Act 1986 and Agricultural Tenancies Act 1995.⁵⁶

(a)Agricultural Holdings.

1.34 Several amendments were proposed to the law of agricultural Holdings, aimed at removing disincentives for tenants taking on additional land or exchanging their tenancies for farm business tenancies under the 1995 Act. A tenant taking on additional land, or agreeing other minor changes in his tenancy, should not inadvertently lose his security of tenure under the 1986 Act, and amendments to clarify the law to this effect were proposed. Similarly, the succession rights of tenant farmers should not be impugned by farm diversification, and non-agricultural income should be relevant when assessing a successor’s eligibility to take on the tenancy following the tenant’s death or retirement. TRIG also recommended that all farm arbitrations should be conducted under the Arbitration Act 1996. This already applies to farm business tenancies, and is more flexible than the discrete code for farm arbitrations that had been applied since 1948 under the Agricultural Holdings Act 1986 and its predecessors. A further non-legislative matter they put forward was a proposal for drafts of key clauses to be made available that could be used in a farm business tenancy to ‘mirror’ a tenancy under the 1986 Act. This is important in practice, as many tenants with fully secure tenancies of agricultural holdings will be reluctant to exchange their current tenancy for a new tenancy, which would of course be a farm business tenancy without statutory security of tenure. This proposal therefore went to TRIG’s remit to promote flexibility in restructuring rural land holdings and estates.

(b)Farm Business Tenancies

1.35 The TRIG also made recommendations for changes to the Agricultural Tenancies Act 1995, mainly to introduce greater flexibility into the farm business tenancy legislation. Their recommendations included the introduction of greater flexibility for landlords and tenants to agree rent review provisions in leases, subject to a continuing bar on ‘upwards only’ review clauses. They proposed the removal of the upper limit of 24 months for the notice period required to terminate a farm business tenancy, in order to facilitate the granting of long term ‘rolling’ tenancies and greater flexibility. They also proposed removing a practical obstacle to landlords giving consent to improvements, by allowing the parties to fix an upper limit (or ‘cap’) for the amount of tenant’s compensation that would be paid at the end of a farm business tenancy. This would remove a barrier to consent being given, in that landlords were felt to be reluctant to give consent if the quantum of compensation that would become payable was not quantified until the tenancy later came to an end.

(c)Fiscal Reform

1.36 The TRIG also made recommendations for new fiscal measures to promote farm diversification and greater flexibility in farm business planning.⁵⁷ These included a proposal to extend the definition of agricultural property for the purposes of agricultural property relief from Inheritance Tax, so as to include land on which diversification into non-farming business had taken place. This would remove a strong distinctive militating against a landlord consenting to diversification by a tenant, as the tax treatment of non-agricultural property would otherwise prejudice the landlords tax position. Landlords should also be given the option to defer payment of capital gains tax on gains that are used to improve the economic value of land let on agricultural tenancies, and the TRIG felt there should be an extension of business asset paper relief from CGT to cover all land let for business purposes. And, finally, all fixed term farm business tenancies for more than 10 years should, for the purpose of Stamp Duty Land Tax, be treated as 10 year agreements – a measure needed, the TRIG felt, to encourage the granting of longer fixed terms with both land and dwellings/farm buildings and fixtures, rather than short term agreement for bare land only. The fiscal recommendations have not been implemented.