B5.104 Share farming, contract farming and joint ventures
An owner of farmland may wish to enter into share farming or contract farming arrangements, rather than simply letting the land. For tax purposes, the landowner is treated as farming the land1 where such arrangements are carefully drawn, rather than assessable under the property income rules, for commentary on property income, see Part B6.
It is always worth considering the best use of various tax efficient farming arrangements in these difficult times for farming. In addition, with so much current potential change in the farming industry, there has been a focus on the need to look at alternative farming solutions to cope. The need to review Contract Farming Agreements and other alternatives to help at this changing and challenging time has never been greater.
There has been commentary in the farming press about the need to improve the role of the tenant farmer and part of the suggestions is to change the current beneficial tax position of farming arrangements. For example, Baroness Kate Rock, who is on the House of Lords Select Committee for the Rural Economy says: 'landowners should not be allowed to use share farming, contract farming, share partnerships and/or grazing licences as thin facades of trading activity so as to gain a tax advantage where they take no risk, have no entrepreneurial input and lack any management control'.
The term 'contract farming' may refer to several different types of farming arrangements. In this Division, the term is used to refer