Farms and Estates Newsletter – Spring/Summer 2018
Welcome to Freeths’ Farms & Estates Team’s Spring/Summer 2018 Briefing. In this we have some important updates which will be relevant to many of our clients. Firstly, we report on the changes to Landfill Tax and it is alarming to read how one might fall foul of this, however inadvertently. Simply moving soil around within a holding may constitute “Waste” and be liable to a tax and it is worthwhile getting to know the circumstances in which this can apply.
Next, Sophie Tompkins has written an interesting article on how abandoned horses and fly grazing horses should be managed and again this is something that we know some of our clients have come across.
Lauren Shaw comments on the developments under Brexit for farms and estates with the draft Agriculture Bill and some current thinking on this, providing a helpful summary on where we are on this important issue.
Finally Sally Goodger has raised some interesting points on the concept of ‘proprietary estoppel‘ being when someone does something to their detriment on the reliance that a third party will do something else. Here we have proposed successors to farming businesses fighting their cases when the farm goes elsewhere!
We hope you are enjoying the good weather but that you also have the rain you need. Do let us know if you have any queries on any of the articles or generally, you can find our details on the Farms and Estates Link on the main Freeths webpage
The Government has stated its commitment to tackling waste crime and has allocated additional funding to the Environment Agency (“EA“) to tackle this issue. DEFRA are progressing a range of approaches to try to reduce illegal waste activities and new legislation has brought in new enforcement powers and new liabilities for illegal waste activities. These changes increase the risks to landowners where illegal waste activities are being undertaken on their land. They also significantly raise the stakes for development work, where the complexities of waste law (in particular in relation to the reuse of excavated material) often lead to inadvertent breaches of waste law.
Landfill tax liabilities on illegal waste deposits
You may be aware that all illegally deposited material present on a site on or after 1 April 2018 is liable to landfill tax. For sites in England, the rate will be the standard rate (currently £88.95/tonne) but sites in Wales will be liable for an unauthorised disposals rate (currently £133.45/tonne). In contrast to permitted sites (where some materials are exempt from landfill tax), all material deposited will be taxable. In addition, HMRC can charge an additional penalty of up to 100% of the landfill tax due and have the right to prosecute for failure to pay.
Any person who deposits the waste or knowingly causes or knowingly permits the deposit is jointly and severally liable for the landfill tax due and any penalties. The legislation assumes that certain parties did knowingly cause or knowingly permit the disposal unless it can be shown to HMRC’s satisfaction that they did not. These parties include the owner or occupier of the land where the disposal was made, the controller of the vehicle from which the disposal was made, anyone who facilitated the transport or storage of the material and any party to a contract for the sale of the material. In addition, officers of liable companies are also assumed to be liable unless it can be shown otherwise. Thus the range of parties who could be responsible to HMRC for the tax is very wide. These liabilities are in addition to the risk of prosecution for waste offences and any fines imposed for such breaches.
The tax liabilities in relation to illegal deposits could be very large. In the HMRC consultation on these landfill tax changes, they highlighted a 2016 prosecution under environmental legislation for the illegal deposit of 6,000 tonnes of waste, resulting in fines of £170k. Had this new tax legislation been in place, the parties could have been additionally liable for over £1m in landfill tax and penalties to HMRC.
Whilst the headlines have focussed on these HMRC powers being used against unscrupulous criminals operating illegal waste sites, they can be used whenever there has been an illegal deposit of waste. Areas where inadvertent illegal deposits of waste are not uncommon is on farm land as well as development sites. This is because, if the necessary steps are not taken prior to excavation, excavated soils become waste at the moment of their excavation. If the soil (now a waste) is then used elsewhere on the site (or on another development site) without a waste permit or waste exemption in place, there is an illegal deposit of waste (albeit often an unwitting one). So something as apparently innocuous as using clean soil excavated from your own land to regrade other parts of the same site can be an illegal deposit of waste giving rise to a tax liability. Even where it is understood that the reuse of excavated material is a waste activity, and waste exemptions are registered for these activities, there may still be tax liabilities. A recent audit by the EA and Natural Resources Wales (“NRW”) found that around 30% of sites using registered exemptions were not in compliance with the exemptions. Thus, there may in fact be illegal deposits of waste even where waste exemptions are purportedly being used.
Many of these breaches on development sites have been undetected to date, not least because the EA has very limited resources to police these activities. However, in contrast, HMRC is well-funded and benefits directly from any taxes it collects. It also seems likely that EA and HMRC will be keen to use these new powers in some early high-profile cases, to show a robust response to waste crime. Thus not only are the consequences of inadvertent breaches of waste law now greater with the addition of the tax liability, but the likelihood of regulatory action is also greater.
New powers to require the removal of illegally stored waste
In addition to the new HMRC powers for illegal disposals, from 9 May 2018, the EA, NRW and local authorities will have new powers to serve a notice on an occupier requiring the removal of illegally stored waste even if the waste was initially deposited legally. Failure to comply with the notice will be a criminal offence. If the land is unoccupied or the regulator cannot identify the occupier without unreasonable expense, the notice can be served on the landowner. Equally, if the occupier fails to comply with a notice or where the notice is successfully appealed on certain grounds, a new notice can be served on the landowner.
Mitigating risks for landowners
These changes in waste regulation increase the chance that a landowner will bear the liability for clearing waste from their land placed there by a tenant or occupier and, possibly also, for paying landfill tax on any unlawful disposals. To protect themselves, landowners should undertake careful due diligence on potential tenants and other occupiers of their land where the land is to be used for waste management activities. They may also want to include provisions in the lease to protect themselves from potential liabilities, such as guarantees, bonds or other financial security. In addition, during the occupier’s operations, the landowner should regularly check the waste activities on site against any permits or exemptions held by the tenant/occupier, to promptly identify any potential breaches, so that steps can be taken before problems escalate.
Managing risks for developers
The potential landfill tax liabilities that could arise from waste law breaches during development could be significant and the risk that officers of the development company could also be personally liable for these sums will be concerning for many developers. It is vital therefore that robust procedures are put in place for all development projects. These procedures should ensure that material management plans are thorough and properly identify all waste materials that will arise on the project and fully account for their treatment, use, storage and/or disposal. Use of the CLAIRE “Definition of Waste Code of Practice” approach can minimise the amount of waste generated on site and maximise reuse of excavated materials without breaching waste legislation. However, it is important to use an experienced consultant to prepare the documentation for this, as recent audits of projects undertaken using this approach found that many were in breach of waste legislation.
In addition, developers should ensure that waste “duty of care” procedures for development sites comply fully with the current guidance. If they do not, and waste from your site ends up being deposited at an illegal site, then, in addition to a potential waste prosecution for duty of care failures, you could be liable for the landfill tax due for the disposal.
To find out more speak to our Environmental Team
Abandoned horses and fly-grazing are possible issues for landowners and they can result in legal liability.
Horses can be left on land for several reasons, for example; when they are not removed at the end of a grazing agreement, when they are grazing without permission (fly-grazing), if they are unwanted or if they escape and stray onto neighbouring land. If one of these circumstances arises, a landowner has statutory responsibilities under the Animal Welfare Act 2006 (AWA 2006) for the welfare of horses on their land. A person responsible for horses commits an offence under the AWA 2006 if they cause unnecessary suffering or fail to take reasonable steps to meet the horses’ needs. These steps are as follows:
- To provide a suitable environment.
- To give access to a suitable diet, such as water and grass/hay.
- To be protected from pain, suffering, injury and disease.
- To ensure the horses demonstrate normal behaviour.
- To be kept with, or apart from, other animals.
In addition to the above, a landowner will have the following responsibilities if they are in possession of the horses:
- Strict liability for any damage caused by the horses.
- If the horses stray onto the highway, the landowner will be guilty of an offence under section 155 of the Highways Act 1990. To minimise risk, the landowner should take reasonable steps to prevent the horses from escaping and causing a road accident.
What are the practical steps before removing horses?
Before exercising contractual rights or statutory powers, a landowner should consider the following practical steps:
- If the horses’ owner is known, ask them to remove their horses – first with an informal approach. If this is unsuccessful, a formal letter from a solicitor might encourage their removal.
- If the owner is unknown, try to identify them. This could be done by asking a vet or local authority to scan the horses for a microchip, checking for a freeze-mark and with relevant people in the locality for information. Once identified, check any person claiming to be the owner is the sole legal owner before they take the horses and before taking any formal action.
- Where the owner is a member of the travelling community, the local authority Traveller Liaison Officer can assist the landowner with liaising with them.
- Report the matter to a horse welfare charity, the RSPCA or the local authority’s animal welfare department. They will be able to provide advice and may remove any suffering horses or horses that are likely to suffer.
- Notify the police and tell them about any risks or potential dangers.
Where there is a grazing agreement in place and the horse has no right to be on the land, the landowner should check they are not breaching the agreement before taking steps to dispose of the horse. Relevant clauses in the agreement can include lien and power of sale, recovery of costs and indemnity. As a last resort, County Court proceedings should be issued to obtain an injunction requiring the owner to remove their horses.
How can a landowner anticipate abandoned horses and fly-grazing?
- Ensure that all pasture is secure, for example locking gates and maintain boundaries in a stock-proof condition.
- Take out insurance that relates to these risks, as to help with the cost of repairing damage, legal costs and the costs of complying with associated statutory requirements.
- Enter info a formal agreement before allowing anyone to put horses on the land.
If you have any queries or you would like more information on this topic, please contact the Agricultural team.
The House of Commons Environment, Food and Rural Affairs Committee (Committee) published a new report on 6 June 2018 entitled “The future for food, farming and the environment”. The results of the Committee’s consultation will inform the upcoming Agriculture Bill, due later in 2018.
Many members of the agricultural community with whom Freeths work closely, have expressed concern at Defra’s report, criticising it as vague and lacking in the certainty required for future planning.
The Committee took evidence from panels of witnesses to hear different analyses of the Government’s proposals. I will summarise the following 4 key elements of the Committee’s report namely: (i) withdrawal of the Direct Payments; (ii) farm competitiveness and diversification; (iii) the new environmental land management system; and (iv) trade and labelling.
(i) Impact of the withdrawal of Direct Payments
The Committee expresses concern at Defra’s failure to analyse the impact that the withdrawal of Direct Payments will have on farm businesses. The Committee’s report highlights the following views arising out of its enquiry:
- There is an expectation that land rents may decrease but tenant farmers will still face market failures which mean that they will struggle to make a profit.
- Livestock farmers are heavily dependent on Direct Payments. As most sheep farmers have already diversified, there is limited opportunity to generate income from elsewhere.
- The cereals and general cropping sector is likely to be impacted severely with Direct Payments making up (on average) 79% and 60 % respectively of farm business income.
In response, George Eustice MP, the Minister for Agriculture, Fisheries and Food has advised that there may be a slower pace of change for vulnerable sectors but this is by no means a certainty.
The report recommends that Defra produces a thorough sectoral assessment of the withdrawal of Direct Payments and calls for ring-fencing of the funds that are released to fund the rural economy and the environment.
(ii) Farm competitiveness and diversification
There are mixed views as to whether or not the Government’s consultation paper will help agriculture to become more productive. The economists consider that Direct Payments stifle entrepreneurship. However, other contributors to the Committee’s enquiry note that the Government consultation does not propose new measures to boost productivity but merely refers to those that are already available.
The Minister suggested that there may be new financial packages available to support investment in machinery or infrastructure. He also referred to the potential for farmers to come together in machinery owning syndicates with funding support being made available through grants.
The Government paper focuses heavily on its resolve to encourage new technology. The Committee’s report is sceptical as to the impact new technology will have, at least in the short to medium term. It asked experts from the agri-tech industries how long it would take before these new technologies begin to impact productivity. The response was that it would probably take a generation.
One of the barriers for farmers is the difficulty to access advice and information as to what really works. Until that information is available, farmers will not have the confidence to invest. There are calls for the Government to supply free independent advice for farmers.
The Committee recommends that the Government produces a farm productivity plan by May 2019 in order to address these gaps in the Government’s proposal.
(iii) Environmental land management system
Defra has made it clear that in order to deliver the new model of “public money for public goods”, there will be a new environmental land management system. As yet, it is not clear how this will be delivered.
Generally, the evidence gathered by the Committee suggests that the new system should be on a contractual basis where environmental incomes are bought by the Government or public-sector organisations from farmers and land-owners. Any new system must learn from the failures in delivery of past agri-environment schemes which were marked by IT failures, poor advice and lack of administrative and advisory staff. However, there are calls from environmental groups to ensure that the new system does not overlook agri-environment schemes that have already been successful.
The Committee welcomed assurances provided by the Minister that new environmental schemes will build on existing ones, be delivery focused and non-bureaucratic.
(iv) Trade and labelling
Defra’s statement that it will “adopt a trade approach which promotes industry innovation and lower prices for consumers” has provoked concern as to how UK farmers will fare when faced with competition from the global market where the same welfare and quality standards do not apply. Further, it is not clear how the drive towards lower prices will interact with the goal of animal welfare and environmental standards.
The Committee calls for a commitment from the Government that trade agreements will specify minimum standards for food entering the UK and urges for an improvement to country of origin labelling and the introduction of method of production labelling.
To sum up, the Committee report is helpful in calling for further clarity on the issues which will impact upon UK farming post-Brexit. It also makes suggestions for how the Government’s latest proposals might be implemented. However, it remains to be seen how the Government will respond and until then, the future remains uncertain. Watch this space for further Freeths’ updates.
In recent months two notable cases have hit the headlines involving children seeking an interest in farming businesses following the death of a parent. Both cases have been pursued on the basis of proprietary estoppel – where to succeed, a claimant needs to show that they are entitled to property because it was promised to them, and they relied on that promise to their detriment.
The first case involves 60 year old Sam James who, following the death of his father, made a claim that his father had, during his lifetime, promised him land that had already passed to one of his sisters and farmland and a business which passed to his sisters and mother under his late father’s will.
Sam had worked in the family business for nearly 35 years. Irrespective of whether any promise had been made, however, he was unable to demonstrate a financial disadvantage since he had been made a partner in the family haulage business following which he had received land and cash worth £200,000 on its dissolution. Sam and his family had also lived rent-free on part of his father’s land.
Sam’s claim failed as the judge found that he had not relied on his father’s promises to his detriment. The judge upheld the will and found that the estate was divided up in a rational and balanced way taking into account the needs of the deceased’s wife and daughters. Sam also sought to challenge the validity of his father’s will on the ground of lack of testamentary capacity. That challenge also failed.
In contrast to this case, Jane Habberfield was ordered to pay her daughter, Lucy Habberfield, £1.1million in cash to represent her interest in a farming business worth £2.5 million in a decision handed down in February. Lucy had worked on the family farm near Yeovil for 30 years until she left in 2013 following an argument with her sister. Lucy’s husband had also worked on the farm for many years. Lucy brought a proprietary estoppel claim saying that her father had assured her that she would take the farm over when he retired and that she had relied on that promise to her detriment. Lucy’s father had left his share of the farm to his wife Jane in his will.
A letter written in 2008 was crucial to the success of Lucy’s claim. It set out a proposal for Lucy to be the owner of the farm following her parent’s death with her brother and sisters receiving some land. The judge concluded that Lucy had succeeded in proving her claim but limited her entitlement to a share in the farm, approximately 45%. In the alternative, Lucy had also brought a claim pursuant to the Inheritance (Provision for Family and Dependants) Act 1975, but this was not needed due to the success of her proprietary estoppel claim.
These cases demonstrate how the success of claims based on proprietary estoppel can vary significantly and that they each turn on their own individual facts. Equally, the existence of a will does not prohibit a successful claim if evidence shows that a promise was made, and relied upon to the detriment of the person to whom the promise was made. The law of proprietary estoppel is complex and legal advice should be sought in each case.
The cases can be read in full at:
James v James & Ors  EWHC 43 (Ch)
Habberfield v Habberfield  EWHC 317 (Ch) http://www.bailii.org/ew/cases/EWHC/Ch/2018/317.html
If you have any questions please contact Sally Goodger, at Freeths LLP
0186 578 1061
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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