THE South's rural economy is being held back by tax rules that stop farmers and landowners from maximising the use of their buildings and land, warn accountants.

Red tape is hitting farmers struggling to diversify in the wake of the crisis affecting the industry.

That in turn is impacting on commercial property opportunities in the Dorset and Hampshire countryside, say accountants Saffery Champness.

The firm's Bournemouth office believes the government has missed a significant opportunity to help the rural economy.

Saffery Champness Bournemouth senior partner David Macey explained: "Many South West farmers are still having problems following the effect of foot and mouth disease, BSE and a general downturn in the economy.

"But if they decide to diversify by converting farm buildings and creating local business opportunities there are a whole raft of tax rules that then come into play, which can negate any advantages.

"The value of most farms is in the land and buildings but the tax rules actually discourage farmers from making good use of them as they are not able to pass on businesses to their children in the same way as they can a farm."

Grants are available to help farmers diversify "but these just provide a quick fix and often more than not the grant money is taken away in tax within a very short period."