Welsh farms could make up 40% of IHT impact, report finds

Welsh farms could account for 40% of the total affected by proposed changes to inheritance tax if the plans go ahead.

The Central Association of Agricultural Valuers (CAAV) has warned the Welsh Affairs Committee that the official estimate of the number of affected farms has been substantially underestimated by the Treasury.

See also: Backbench Labour MPs push for adjustments to IHT relief

Citing the Treasury’s figure of 520 farms which will be affected by the change in its first year, the CAAV’s Jeremy Moody suggests that some 200 Welsh farming taxpayers will have an inheritance tax (IHT) liability.

In a letter to the parliamentary Welsh Affairs committee, Mr Moody says this would equate to 6,000 Welsh farmers being affected over a 30-year generation.

He also points out the effects of inflation should the full relief band not be properly indexed, given that other IHT thresholds have been frozen.

The reasons for the discrepancy, Mr Moody says, could be because the Treasury’s figures do not take account of farming claims made only under business property relief (BPR), and that the change is expected to create new claims that would previously have been exempt. 

In addition, he points out that the Office for Budget Responsibility has now twice described the Treasury’s figures as having a high level of uncertainty, and advised that it might take 20 years for patterns to settle down with changing taxpayer behaviour.

Committee response

Responding to the report, Welsh Affairs Committee chairwoman Ruth Jones said: “This is an important issue for the many taxpayers across Wales who rely on farming and the farming supply chain for their livelihoods.

“We must ensure that any changes to tax are proportionate and do not leave some out in the cold.”

FUW response

Farmers Union of Wales (FUW) president Ian Rickman said: “These findings again confirm a significant proportion of Welsh farmers responsible for Welsh food production and agricultural activity will be adversely affected by the changes to agricultural property relief.”

He added that the UK government must undertake Wales-specific analysis into the possible effect of the changes and review the far-reaching implications of this “ill-thought out policy for Welsh farmers”.