Accountancy group challenge Treasury claims on IHT
© Adobe Stock Proposed government changes to inheritance tax reliefs are “ill-thought through” and likely to result in “permanent damage” to rural businesses, according to a report by the Rural Accountancy Group.
Comprising of 10 accounting firms which represent more than 10,000 farming and agricultural businesses, the group has urged the government to consider alternative measures instead.
The report concludes that the current proposed measures, to restrict agricultural property relief (APR), would continue to encourage investment in land for tax avoidance, and result in reduced investment in genuine farm businesses.
See also: NFU to intensify campaign against ‘family farm tax’
One of the suggested revisions to the government’s proposals by the group is to increase the APR qualifying period from two to 10 years for land ownership, to make it a less attractive option for outside investors looking to avoid tax.
Sam Kirkham, partner at Albert Goodman and Rural Accountancy Group spokesperson, said: “The chancellor has drastically overlooked the affordability of the new inheritance tax introductions for small- to medium-sized farms, even spread across the proposed ten-year payback period, as evidenced by our case studies.
“We strongly urge the government to reconsider its proposals and ensure it supports the rural and small business community.”
Ms Kirkham added that the changes would force hard-working families to change business structures to minimise its impact, needlessly disrupting operations and reducing investment in their business.
Westminster debate: MPs oppose IHT plans
Welsh tenant dairy farmer and Plaid Cymru MP Ann Davies led a Westminster Hall debate on the impact of changes to agricultural property relief from inheritance tax (IHT) on Tuesday 28 January.
Ms Davies said: “It is clear that the assessments of the impact of the changes on working farms across the UK, on the wider economy and on the wider food supply chain are inadequate.”
A number of MPs from across the political spectrum spoke out against the government’s changes to IHT reliefs, including shadow farming minister and Conservative MP Robbie Moore, Liberal Democrat MP Tim Farron, and Reform UK MP Rupert Lowe.
However, Steve Witherden was the only Labour MP willing to put his head above the parapet and speak out against the government’s proposals.
Mr Witherden said: “The changes risk having a deeply detrimental effect on working family farms. What is at stake here? Food security.”
Efra committee chairman and Liberal Democrat MP Alistair Carmichael calculated that a farm business would need to pay £400,000 in tax for a £3m farm under the new threshold.
He said if they earned £25,000 a year, it would be impossible to make that payment over 10 years and therefore land would have to be sold.
A response to questions was given by the parliamentary secretary to the Treasury, Torsten Bell.
Mr Bell said it was the right decision by the government because it will maintain significant levels of IHT relief for agricultural property, far beyond what is available for most assets.
“The debate is really about how we balance the objectives of protecting family farms with the public finances and public services. The status quo, the full unlimited exemption introduced in 1992, has become unsustainable.
“The benefits have become far too heavily skewed towards the wealthiest estates. Some 40% of APR benefits the top 7% of estates making claims.”