THE government's £500 million initiative to help farmers recover from the foot and mouth crisis penalises those letting their land, warn accountants.

Tax changes are needed for the initiative to be successful, warn Bournemouth accountants Saffery Champness.

"There are still fundamental barriers to progress in the current tax system," said David Macey, senior partner at the Saffery Champness office in St Stephens Road, Bournemouth.

"The strategy pushes the need to attract newcomers to the farming industry and to support tenant farmers.

"But the current tax set-up penalises land-owning farmers who move out and let their farm and land to unincorporated tenants because they may no longer qualify for capital gains tax re-investment relief and business asset taper relief."

The government strategy calls for diversification "but again there are significant tax disincentives" which prevent farmers from diversifying into other areas of business.

"For example there are restrictions on the offset of losses realised on the farmers' core farming business against the profits from their new and diversified business. We believe that this restriction should be removed."

Whitehall's new strategy stresses the need for improved efficiency, but farmers face "significant tax disincentives" which prevent upgrading equipment.

One example being the failure of the government to write of the cost of money spent on new more efficient farm equipment, said Mr Macey.