Agriculture & Rural Bulletin February 2010

The need for agricultural holdings legislation to encourage new entrants to the farming industry has been well voiced. With this in mind The Tenant Farming Forum has recommended a package of measures to the Scottish Government which, if enacted into law, will hopefully enhance the confidence and security of both landlord and tenant. The main proposals include:

• Reducing the minimum term of a Limited Duration Tenancy (“LDT”) to 10 years.
• Maintaining the maximum length of a Short Limited Duration Tenancy (“SLDT”) at 5 years.
• Allowing an SLDT to be converted to a minimum 10 year LDT at any time during the period of an SLDT by agreement between the landlord and tenant. In such a case the 10 years will be taken to have started on the start date of the SLDT.
• Allowing landlords and tenants to freely negotiate terms for the provision and renewal of fixed equipment.
• Amending the law relating to Post-Lease Agreements to allow parties to consider annulment and rent adjustments to take place at the same time.

For advice on agricultural leases including grazing arrangements, licences, SLDTs, LDTs and contracting farming arrangements please contact Laura Moore in our Agriculture and Rural Property Team on 0131 247 1171.

The Less Favoured Area Support Scheme (Scotland) Amendment Regulations 2009 came into force on 18 December 2009, amending the existing LFASS for 2010. The most notable change for 2010 is the increase in payment rates to farmers in Less Favoured Areas (LFAs) classified as “Fragile” or Very Fragile” – areas concentrated in the North and West of the country. The payment rates for these areas are increased by 19% with payment rates for other LFAs remaining at the same level as in 2009.

Beside the increase in payments, there are few significant changes to LFASS for 2010. However the Scottish Government has made it clear that further changes will be made for 2011, namely a focussing of support on livestock farming on the hills and the tightening of the LFASS eligibility criteria to ensure that payments will only be received by active farmers. The manner in which these changes will be achieved is still the subject of discussion between the Scottish Government and various stakeholder groups such as NFUS. Measures currently being discussed include minimum stocking densities and livestock ratios. Concerns have been raised that a “one-size-fits-all” approach to minimum stocking densities would fail to achieve a better targeting of payments and so it is likely that variable minimum stocking densities reflecting differing qualities of land will be developed to ensure that active farmers with particularly poor land are not excluded.

Looking to the longer term prospects for LFAs, the European Union has signalled its intention to make significant changes to the support for LFAs from 2014. The EU intends to remove socio-economic considerations from LFA eligibility and focus on biophysical criteria such as low temperatures and poor soil quality. The biophysical criteria suggested do not include considerations such as distance from market – a consideration that is taken into account by the current LFASS. Concerns have been expressed that the EU proposals are biased towards difficulties posed for crop production and fail to grasp many of the difficulties that livestock farmers face. Full legislative proposals are not expected from the EU until autumn 2011.

For further information please contact Eilidh MacEwan in our Agriculture & Rural Property Team on 0131 247 1038.

The Scottish Government are currently consulting on proposed reforms of crofting law which aim to “place crofters at the heart of decision making; enable them to access finance on the same basis as everyone else; and tackle the corrosive effect of absenteeism, neglect and speculation.” The Rural Affairs and Environment Committee is seeking views from organisations, bodies and individuals with an interest or involvement in the proposals contained in the Bill and their likely impact and these should be submitted to the committee by 4 February 2010.

Of particular interest to individual crofters and landowners is a recent announcement by Environment Minister Roseanna Cunningham that the Crofters Commission is to tackle absenteeism and the neglect of croft land head on. We understand that absenteeism was cited in the recent Government consultation on the proposals as the most important problem faced by the crofting community. In the case of absent tenants, the Commission will seek proposals for the occupation of crofts. Ultimately failure to reside on, or assign the croft to another, may result in the tenancy being terminated and the croft re-let. Proposals for crofts to be occupied will also be sought from owners of vacant crofts who do not live on them. In the case of absent tenants, the Commission will seek proposals for the occupation of crofts. These proposals are seen as vital to sustainable economic development.

At Morton Fraser we act for both individual crofting tenants and for owners of croft land. For further advice in this area please contact Laura Moore in our Agriculture & Rural Property Team on 0131 247 1171.

The latest Agricultural Wages Order came into force on 1 October 2009 and what follows is a brief overview.

Minimum Wage & Overtime
• A minimum hourly rate of £5.80 must be paid to all workers in the first 26 weeks of employment.
• A minimum hourly rate of £6.32 must be paid to all workers employed for more than 26 weeks by the same employer.
• The additional sum payable to workers with appropriate qualifications has increased to £0.96 per hour.
• The dog allowance has increased to £4.80 per week for each dog up to a maximum of 4 dogs.
• Apprentices in the first 12 months of employment are entitled to £3.50 per hour.
• Overtime at rate of £8.70 per hour must be paid to employees in their first 26 weeks of employment. This applies where a worker works more than 8 hours in any day or 39 hours in any week. This rises to £9.48 per hour for those employed for more than 26 weeks by the same employer.
Accommodation which is provided free of charge by an employer to a worker can count towards the minimum wage and in such a situation the value of this benefit will be £1 per week. This amount can be deducted from a worker’s pay even if this would take their pay below the statutory minimum wage.

It is important to note that the hourly rates apply equally to full-time workers, part-time workers, students, workers on piece work, etc and also no matter what type of work is done. An employer can of course pay more than the minimum rates, but cannot pay less.

Holidays

Agricultural workers are entitled to five weeks’ holiday per year, a week being equivalent to the number of days that an employee would be expected to work in the course of a regular working week. On top of this, workers are entitled to four special holidays - Christmas Day, New Year’s Day, the first Monday in May and the first Monday in October. This right means that Agricultural workers enjoy a slightly greater holiday entitlement than is required under the Working Time Regulations (WTR). The Order has provisions for carrying forward holidays but this is only permissible for the entitlement over and above the rights under the WTR.

Rest Periods

Agricultural workers are entitled to the same rights as other workers regarding rest periods and daily rest breaks although given the nature of their work “exceptional circumstances” may apply which can alter this right. In such circumstances, rights in terms of “compensatory rest” will be applicable.

Absences due to Sickness or Injury

Sick pay is due to agricultural workers who have been continuously employed by the same employer for at least 52 weeks when a worker is prevented from working due to illness or injury. It is not necessary for the illness or injury to have occurred at work. 13 weeks of agricultural wages sick pay is provided for. The rate of pay is the minimum hourly rate to which the worker is entitled multiplied by the number of hours that they would normally work per week.

We have launched an Employment Protection Package for employers to provide a comprehensive solution to employment law issues.

The Employment Protection Package includes:
• Annual employment documentation health check
• 24 hour access to employment law advice
• Tribunal awards insurance cover of up to £250,000 including legal costs
• Affordable monthly fixed fee payments

Click here for further details or for a free quote: Employment Protection Package

For information on how Morton Fraser can help you with the law relating to employers and employees please contact Graeme Dickson in our Employment Team on 0141 247 1118.

According to the Health and Safety Executive, around 400,000 people worked in agriculture (less than 1.5% of the working population) in May 2009, yet agriculture has one of the highest fatal accident rates of any industry in the UK. This article will focus briefly on two topical areas; namely, working at height in agriculture and forestry and how farm diversification has resulted in some new health and safety prosecutions.

Working at Height

Deaths recorded in agriculture from falls through roofs has been a priority area for the Healthy and Safety Executive since 2000. The crucial piece of legislation here is the Work at Height Regulations 2005. This applies to work that creates both the risk of people falling from height and of objects falling on to people below.

In respect of people working at height, the regulations are based upon an over-riding principle that suitable and sufficient measures are taken to prevent, so far as reasonably practicable, any person falling a distance liable to cause personal injury. The regulations then go on to impose a number of measures which are designed to minimise that risk. In an agricultural context this has seen farmers replace their old faithful of an unsecured “tattie box” on forklift pallet forks with a safety cage/working platform which attaches securely to the forklift, the purpose of which is to prevent people and objects from falling.

Prosecutions under the Work at Height regulations 2005 have not just been limited to accidents in and around farm buildings and farm steadings; prosecutions have occurred in relation to forestry and tree surgeons. In a recent Scottish case the employers, who were a firm of tree surgeons, were successfully prosecuted after an accident caused by the injured person cutting through a rope whilst he was cutting down a tree.

With a high accident rate to tackle and a keen HSE focus on the industry it is critical that employers in agriculture ensure that all work at height is properly risk assessed to ensure that measures are taken to reduce the risk of falls, to prevent objects falling from the work site and to identify fragile surfaces where further precautions will be needed.

Diversification

Diversification activities of farmers have also led to a number of recent health and safety prosecutions. Diversification projects e.g. farm shops, organised farm visits by schools etc have seen an increase in members of the public taking to the countryside. One of the most at risk groups are children. In 1998 the Prevention of Accidents to Children in Agriculture Regulations were introduced, followed up by an approved code of practice in 1999.

The regulations and code of practice apply to all children resident on farms, as well as visitors. One requirement of the 1998 regulations and, often ignored, is a prohibition on children under 13 from riding in tractor cabs or other self propelled machinery used in an agricultural operation where a known accident risk exists from farm machinery. Anyone who is bringing the public into a working farm steading environment should be aware of the risks involving the movement of heavy machinery and ensure that they have measures in place to keep vehicles and pedestrians separated – many deaths are the result of children being run over by an operator who was not aware of their presence. Where farmers are considering diversification it is essential that they carry out thorough risk assessments for all new activities and seek appropriate external advice if in doubt.

For further information please contact Claire Anderson in our Health and Safety Team on 0131 247 1335.

The rules relating to Furnished Holiday Lets (“FHLs”) are due to change from 6 April 2010. Essentially, the changes will mean that current advantageous tax treatments available to owners of such properties will no longer be available. The reasoning behind the changes is to ensure a level playing field with landlords of residential property.

Currently, the FHL rules allow landlords of furnished holiday properties, which satisfy certain conditions, some of the tax treatments available to traders. FHL landlords are treated as though their qualifying FHL business is a trade for the following purposes:

• Income loss relief;
• Capital allowances;
• Landlord's Energy Saving Allowance;
• Certain Capital Gains reliefs; and
• Relevant earnings when calculating the maximum relief due for an individual’s pension contributions.

However, from 6 April 2010, FHL owners will no longer be eligible for the following Capital Gains Tax (“CGT”) reliefs:-

• Entrepreneur's relief (which reduces the taxable gain on the sale of a business from 18% to an effective 10%);
• Roll-over relief (which allows gains arising on the sale of business assets to be deferred if the proceeds of sale are re-invested into other business assets); and
• Specific hold-over relief for business assets (which allows the accrued gains arising on a lifetime gift of property to another individual to be deferred and assumed by the donee).

In addition, losses from FHLs will not be able to be set against other income (e.g. other trading or employment income); capital allowances will no longer be available (instead there will be wear and tear allowance at 10% of the rental income received in the tax year) and income from FHL will no longer be “relevant earnings” for pension purposes.

In view of the changes, individuals may wish to crystallise a capital gain on a FHL prior to 6 April 2010 in order to take advantage of the CGT reliefs which will be repealed after this date and our tax team would be happy to advise further on this. It may also be a good opportunity to consider other issues at the same time, such as Inheritance Tax planning and the potential to maintain tax reliefs by qualifying as a trade. In particular, it is relevant to note that Inheritance Tax Relief (via Business Property relief) may still be available in some circumstances, subject to H M Revenue and Customs’ approval.

For more information please contact Heidi Poon in our Tax Team on 0131 247 3188.

The need to make properties energy efficient is a topical issue facing private landlords. Those put off by the potential cost of upgrading properties to make them more energy efficient may like to consider the Landlord's Energy Savings Allowance. This Government scheme gives tax breaks to landlords to help with the cost of energy efficient improvements.

Landlords who pay income tax (excluding corporate landlords) and who let residential property can take advantage of the scheme in relation to expenditure on buying or installing qualifying energy saving items incurred before 6 April 2015. Tax relief of up to £1500 per property is allowed, thereby reducing a landlord’s taxable income by the amount they spend on qualifying items. This applies irrespective of the number of properties a landlord may own.

The qualifying energy saving items are:-

• Loft insulation;
• Solid wall insulation;
• Cavity wall insulation;
• Floor insulation;
• Hot water tank and pipe insulation; and
• Draft-proofing.

For more information please contact Laura Moore in our Agriculture & Rural Property Team on 0131 247 1171.

The law is to change next month to allow certain microgeneration equipment - domestic wind turbines and air source heat pumps – to be built without planning permission.

Depending on your point of view, this could be good or bad news.

The Scottish Government has set ambitious targets in respect of the use of renewable energy resources. It has passed the Climate Change (Scotland) Act 2009. The First Minister has said that this legislation is groundbreaking, and that it sets an international example that his Government hopes other countries will follow.

The Climate Change Act requires permitted development rights for domestic wind turbines and air source heat pumps to be introduced by 5 February 2010. With permitted development rights, planning permission will be deemed to have been granted provided that certain criteria are met.

The Scottish Government has just published a report which it commissioned into how these permitted development rights should work. The Government has consulted extensively on what has been quite a contentious issue.

Scottish Ministers recognise that in framing these permitted development rights, consideration will have to be given to likely impacts in respect of noise, visual impact and environmental factors. This is reflected in the report.

To benefit from permitted development rights, the microgeneration equipment will need to be within grounds which are enjoyed as part of a house of block of flats. However, there will be further restrictions to prevent any adverse impacts.

Suggested restrictions include allowing development to take place only if the noise emitted by the equipment and heard at a neighbouring property does not exceed a specific threshold.

Visual impact is often a contentious issue. To address this, size restrictions are suggested in relation to domestic wind turbines which are attached to buildings, with different size restrictions suggested for pole mounted turbines, depending on how far they are away from neighbouring properties. Only one turbine would be granted permitted development rights at each property.

We shall need to wait and see how the Scottish Ministers frame their Order. The report suggests a review after three years to see how these new permitted development rights have been working. The Scottish Government is also committed to the expansion of permitted development rights in general as part of their drive to simplify the planning system. We will see more change in the future.

For further information please contact Douglas Milne in our Planning Team on 0131 247 3181.

For individual clients we are always keen to stress the benefits of making a will and the need to review this regularly to ensure the provisions remain relevant and appropriate as personal circumstances and tax regimes change. This is no more important than in the case of owners of agricultural property where Inheritance Tax and specific reliefs are commonly material considerations, particularly so when considering the continuity of a family business from one generation to the next.

In the last few months we have been busy on a number of cases, all with differing circumstances, working through clients’ aims and aspirations for management of and succession to their personal and business assets, be that during lifetime or on death. If you have not reviewed your personal and business circumstances recently now would be a good time to do so, given the current economic climate, the likelihood of an increasingly demanding tax regime and with a change of government in the offing.

One of the strengths of the Agriculture & Rural Property Team at Morton Fraser is that we act for a great variety of clients with interests in all types of agricultural and rural property. This means that we have valuable experience to draw upon and are ably supported by colleagues who are specialist practitioners in other relevant areas of law, such as tax, succession and financial planning, as well as corporate business and employment.

For further information or to discuss how we can assist you to take stock please contact James Rust in our Agriculture & Rural Property Team on 0131 247 1013 or at.