TFA suggests IHT compromise package for Treasury
© MAG/Philip Case Raising the thresholds for agricultural property relief and giving greater opportunity for older farmers to transfer their assets tax-free are among a number of improvements to the government’s inheritance tax plans proposed by the Tenant Farmers Association.
The suggestions are contained in a new Tenant Farmers Association (TFA) briefing document for politicians ahead of a Westminster Hall debate scheduled for Monday (10 February).
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That debate has been triggered by an e-petition of almost 150,000 signatures opposing the government’s plans to impose 20% inheritance tax (IHT) on farm assets of over £1m – a debate that is set to be preceded by another major farmer rally in London on the same day.
Speaking ahead of the rally, TFA chief executive George Dunn said he understood the government’s desire to close agricultural property relief (APR) as a tax loophole for cash-rich investors.
The TFA also recognised the need for government to raise revenue to fund front-line services while protecting small family farms.
“However, what has been announced achieves neither of those objectives,” said Mr Dunn.
“We are not calling for the government to U-turn its policy, but we do believe the policy needs to be finessed.”
With a technical consultation on trusts coming soon, the TFA believes this should be extended to include other technical changes to the IHT proposals.
It suggests the Treasury should:
- Increase the zero-rate threshold for APR and business property relief (BPR) from £1m (combined) to at least £2m
- Allow the combined APR/BPR zero-rate band to be transferable between spouses and civil partners without them having to be joint holders of the farm’s assets prior to death
- Amend the rules that sees the £175,000 “residence” nil-rate band diminish for estates worth more than £2m, by increasing that threshold to at least £5m
- Exempt any land let for 10 years or more, without scheduled break clauses, from IHT (to encourage longer lettings)
- Allow individuals who will be 70 or over as at April 2026 to pass on their assets now and only be required to survive for one more year to avoid IHT, rather than seven years.
Mr Dunn also questioned the Treasury’s login in targeting IHT on farm assets, while retaining rollover relief for capital gains tax, which would provide an even greater incentive for wealthy individuals to chase land purchases as a way of avoiding tax.
Northern Ireland to be hardest hit by IHT
A new assessment by the Northern Irish Rural Valuers’ Association has shown the extent to which the government’s figure of just 500 farm businesses a year being affected by IHT across the UK is a “significant underestimate”.
Given the higher price of land in Northern Ireland and the fact farms have a single owner more often than elsewhere in the UK, the study reveals that at least 6,000 NI farming taxpayers could be affected by the changes over a generation (30 years).
That is equivalent to some 420 cases a year, or up to 85% of the entire UK Treasury estimate.
Ulster Farmers Union president William Irvine said: “These findings are a wake-up call for the Labour government.
“It’s time our government face the facts and admit that Treasury’s figures severely underestimate the true impact of these inheritance tax changes before it is too late.”