Think tank's IHT report fails to grasp consequences of reforms
CenTax assessment of family farm tax relies on narrow data, argues CLA
A think tank's new report assessing the impact of the government's inheritance tax reforms fails to grasp the true consequences of the changes, the CLA has argued.
The Centre for the Analysis of Taxation (CenTax) has published a report that claims plans to cut inheritance tax reliefs will largely protect family farms.
The report estimates that around 30% of farm estates would be impacted by the reforms, of which around 200 estates per year potentially comprise family farms valued at less than £5 million.
It claims almost half (49%) of all impacted farm estates would see a tax increase of less than five percentage points.
The CenTax researchers did, however, acknowledge that the changes could be better targeted, and suggested two alternatives:
- A ‘minimum share rule’ under which relief would only be available if more than 60% of a deceased’s estate is made up of assets eligible for APR or BPR. This change could, CenTax argues, fund an extension of 100% relief for farmers and other business owners to £5 million per estate with no change to the overall tax take.
- Alternatively, an ‘upper limit on relief’ that would cap the government’s proposed 50% relief at £10 million, with no relief at all beyond that.
'Devastating consequences'
Country Land and Business Association (CLA) President Victoria Vyvyan said:
"Labour's favourite think tank has decided that a Labour Government's policy is fundamentally good. That is no shock. Just like Treasury Ministers, however, CenTax has used a tiny amount of data to justify its view, and made no effort to understand the collapse in investment, job losses and rural growth that we can see all around us. Make no mistake, these devastating economic impacts are caused directly by government's inheritance tax reforms."
These reforms to inheritance tax will cost the Exchequer £2bn, with 200,000 jobs lost and £15bn in lost economic activity. This is the reality of what is happening
"Enough of this nonsense, it is time for Sir Keir Starmer to show some leadership and tell Treasury Ministers they have it wrong and must change tack for the good of the country.
“While a higher relief threshold would help some businesses, it would only minimise the damage, not remove it entirely. In considering any alternatives Treasury must become more willing to work with businesses and entrepreneurs to understand how growth can be stimulated for businesses of all sizes, rather than steamrollering through such a short-sighted and damaging policy.”
What other inheritance tax changes might the Treasury look at?
According to national newspaper reports, the Treasury is looking at ways to raise more money from inheritance tax amid growing pressure on the country’s finances ahead of the autumn budget.
Among the reported moves being considered are changes to how wealth or assets can be given away prior to death to reduce inheritance tax liabilities. This includes examining the possibility of a cap on lifetime gifting.
Responding, CLA President Victoria Vyvyan said:
"Passing on a family business is how parents keep their life’s work alive through their children. It sounds like Labour is planning to make this even more difficult.
"Cap the transfer of business assets, and families could be hit with immediate bills they can’t pay. That could mean selling stock, letting go of employees, or walking away from a trade built over a lifetime.
"Higher capital gains rates could keep owners hanging on for years to protect the viability of the business, making it harder for the sons, daughters and apprentices to step in.
“They say this will raise money. In truth, it would cost the people who grow our food, keep our shops open and care for our countryside – balancing the books by cutting the future short."