Pre-Budget fears of inheritance tax relief cuts grow

As speculation mounts that inheritance tax reliefs are a likely target in the upcoming Budget on 30 October, the NFU has warned of “serious impacts on family farms” if major changes are imposed.

Farmed land currently benefits from Agricultural Property Relief (APR), which allows working farms to be passed on to the next farming generation free from inheritance tax, so long as they are working farming businesses.

See also: CLA reveals dangers of removing inheritance tax relief

But Treasury leaks, reported on by the BBC, suggest a number of changes are possible.

These could range from adjusting thresholds, to imposing upper limits on the benefit, to scrapping it altogether.

NFU analysis suggests that scrapping it would only save the Treasury some £120m a year, but the impact on farming would be much larger.

NFU president Tom Bradshaw said: “Farming is often a generational business, and APR is what makes it possible for small family farms to pass from one generation to another.

“Major APR changes would put at risk many farming families’ succession plans and consequently undermine the government’s own ambitions for food and environmental security.

“I’m also very concerned that changes would damage the tenanted sector, as landowners will have much less incentive to let land to agricultural tenants.”

Tight-lipped 

While the Treasury has so far remained tight-lipped on what changes, if any, might be announced on 30 October, James Murray, exchequer secretary to the Treasury, told a Westminster Hall debate on Thursday (17 October) that difficult decisions lie ahead on spending.

There were many different views on inheritance tax relief, he added.

“Stakeholders, including Family Business UK and the Country Land and Business Association, have argued strongly against any prospect of the reliefs being abolished,” Mr Murray said.

“Other organisations are in favour of changes, with the Institute for Fiscal Studies suggesting that a cap on such reliefs could allow those passing on small farms or businesses to be taken out of inheritance tax, while preventing agricultural and business investments from being used to avoid it.”

Crucial role

But Conservative MP Harriet Cross insisted that APR and Business Property Relief play a crucial role in securing the longevity of farming and family businesses.

“Without inheritance tax reliefs, the value of an individual’s business assets will be chargeable at a full 40%,” she said.

Efra committee chair and Lib Dem MP Alistair Carmichael added that changes could bring unintended consequences on the wider rural community.

He said: “What affects farmers will affect vets, agricultural merchants, local shops and post offices in some of the most economically fragile communities to be found anywhere in the country.”