The Tenant Farmers Association (TFA) has called on the chancellor to 'reform rather than abolish' the inheritance tax agricultural property relief (APR).
Ahead of the autumn budget, the industry body is the latest to urge the government to not make the 'ill judged' decision following a string of warnings by other farming groups.
The move would 'seriously damage' the tenanted sector of agriculture, which the TFA said included the 'most asset poor farming businesses in the country'.
On the assumption that business property relief (BPR) will remain largely intact, it noted that trading owner occupiers of farmland would continue to be able to pass down their land through the generations after death without fear of inheritance tax.
However, the TFA said that for landlords who cannot access BPR, they would find other tax havens for their assets, including taking land back in hand in an attempt to demonstrate that they are trading in order to switch from APR to BPR.
The TFA warned that would 'effectively kill off' the tenanted sector of agriculture coming from privately owned estate land.
Its chief executive, George Dunn said “We are already seeing, first hand, concerns about how inheritance tax charges change the way that traditional estates are thinking about the management of their agricultural land.
"If APR was abolished this will make things hugely more difficult for farm tenants,” he warned.
Rather than abolishing it for let land, the TFA believes that it should only be available to those landlords prepared to let for the longest tenancy terms and all those already letting under secure tenancies regulated by the Agricultural Holdings Act 1986.
At the same time, it believes government should be providing those landlords with the opportunity to deem the rental income received in respect of those secure tenancies as trading income, to assist with access to BPR across their wider estate interests.
This would deliver more sustainable agricultural tenancies and begin to reverse the trend of insecurity, according to the TFA.
It would also be beneficial if landlords had the opportunity to lock in their capital taxation position from the start of any agricultural tenancy for the full duration of the lease.
It said some exclusions would need to be introduced for land used for high-value crops, including horticulture, normally farmed in rotation. However, the general rule of supporting longer term tenancies 'has merit'.
Mr Dunn said: “Farming is a long-term endeavour requiring significant capital investment, patience, good soil management and the ability to balance profitable years against the bad.
"With 80% of all new agricultural tenancies let for five years or less, it is clear we need to nudge the market into providing a greater degree of long-term security.
"Short-term and restrictive tenancies are holding back progression, investment and sustainable land use. We can change this situation with reform of APR.
"However, serious damage will be caused if the chancellor takes a knee-jerk, abolitionist approach,” he warned.
Farming groups have warned the government numerous times to refrain from changing the reliefs, with the NFU recently writing to Prime Minister Sir Keir Starmer about the concern.
The Country Land and Business Association (CLA), which represents thousands of landowners, urged farmers to write to their MP stressing how scrapping the reliefs would be a 'catastrophic betrayal' to food producers.
