Defra minister plays down impact of IHT changes

Defra farming minister Daniel Zeichner has accused farmers of overstating the impact of the planned cuts to agricultural property relief (APR) which mean farming assets worth more than £1m will be liable for 20% inheritance tax (IHT).

Addressing the annual Egg and Poultry Industry Conference in South Wales on Monday (11 November), Mr Zeichner said there were a range of views as to how these measures will work out.

See also: Farmers plan second ‘anti-Budget’ rally in London for 19 November

“Inheritance tax is really complicated and no two situations are the same, but our genuine view is that it will not be affecting many people,” he said.

“The feedback I’ve been getting from some of my colleagues is that, when people have sat down and gone through the detail, they are then much more reassured.”

In particular, he pointed to Treasury figures which show that there were just 462 claims for APR last year, and that figure was expected to go down.

Mr Zeichner said the low claim rate for APR was “very much at odds with much of what is being said.

“These are the facts, and I think it is worth looking at them.”

Short-sighted

But NFU president Tom Bradshaw said the government had failed to understand how farming works and the policy was short-sighted and had not been properly thought through.

Feelings among food producers were “visceral”, and there was a real sense of betrayal, given the promises the government had made before the general election with regards to not increasing the tax burden on working people.

Instead of investing in their businesses, farmers would now have to put any spare cash they made aside, to provide for future death duties.

“The damage that has been done with the Budget is going to take a very long time for our industry to get over,” Mr Bradshaw said.

Farmer reaction

Mr Zeichner’s comments also prompted an angry response from the floor.  

Broiler grower Jonty Hay said the minister had got things about face, suggesting food security was about to go “down the swanny”.

“You say there were only 462 claims last year, but that will roll on and on and on. Farm incomes are on a knife edge, and in 10 years’ time, those businesses will be gone.”

British Free Range Egg Producers Association head of strategy Gary Ford told the minister that poultry businesses would be disproportionality hit by the changes to inheritance tax.

Even though many did not have a great deal of farmland, they did have highly specialised buildings that were often worth millions. These could not be readily sold off to fund any IHT dues.

Mr Ford also pointed to the impact on construction businesses. “A number of farmers have already cancelled their orders because of the announcement that was made in the Budget,” he said.

Positive spin

But Mr Zeichner said there would still be opportunities to gift assets without paying IHT, if the donor survived seven years.

The rule change could also deter outside investors from buying up farmland as a tax dodge.

Another plus was that the introduction of 20% IHT on farm assets would encourage earlier discussions around succession.

“I do see people farming late into their 70s and 80s,” said the minister. “I understand the reasons, but there are too few conversations in the family about how to pass it on to the next generation.”