MPs demand changes to inheritance tax raid on farms
Plans to levy inheritance tax on farmland threaten the future of British agriculture and should be paused while its ill effects are properly examined, an influential committee of MPs has said.
In a damning report on the state of British farming, the Environment, Food and Rural Affairs (EFRA) Committee argued there was a “considerable risk” that ending a longstanding inheritance tax carve out will inflict “unintended consequences” on some of Britain’s most vulnerable farmers.
“The conclusion that we have come to is that if these proposals go ahead as they are currently framed, then this is going to be a serious threat to the future of farming in the United Kingdom,” Alistair Carmichael MP, EFRA Committee chair, told CityAM.
“The government could have done a consultation, they could have done an impact assessment et cetera. They haven’t, and as a consequence, it’s difficult for anyone to have any confidence in the case that they have put forward.”
As part of its maiden Budget in October, the government ended the decades-old inheritance tax exemption afforded to farming estates known as Agricultural Property Relief, arguing that wealthy investors had been buying up farmland as a wheeze to avoid paying the 40 per cent levy.
Under the plans, currently slated to come into force in April next year, the government will restrict the full relief from inheritance tax on landowners to the first £1m, after which there will be a tax of 20 per cent when it is passed onto the next generation.
Backlash to inheritance tax reforms
The announcement – dubbed the ‘family farm tax’ by Labour’s political opponents – evoked a furious backlash and sparked a wave of protests across the country. Farmers argued the change would force them to sell land that had been in their family for generations, while industry groups like the National Farmers’ Union accused the Treasury of underestimating the number of estates affected by the change.
In the EFRA Committee report, titled ‘The government’s vision for farming’, authors recognised the “longstanding concerns” that APR and a similar relief for family-owned firms known as Business Property Relief (BPR) were “being used by individuals to shelter wealth”.
But they gave an excoriating assessment of the manner in which ministers shaped and announced the inheritance tax policy, saying it showed a “disregard of more vulnerable farming groups” that had fuelled low confidence and morale levels in farming.
To avoid the worst of fallout, the committee proposed the inheritance tax policy should be pushed back by a year. Doing so would allow those affected to rearrange their affairs, authors said, and will allow time for a formal consultation and impact assessment to be carried out.
“Do it as it ought to have been done properly in the first place, tackle the people that we know need to be tackled,” Carmichael, a veteran Liberal Democrat who represents Orkney and Shetland, added. “Go after the super rich, who are using land to shelter their wealth. But do it in a way, that doesn’t actually have all the unintended consequences for family farmers.”
A spokesman for the Department for the Environment, Food and Rural Affairs, said: “Our reforms to Agricultural and Business Property Relief are vital to fix the public services we all rely on.
“Three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most people pay, and payments can be spread over 10 years, interest-free.”
Responding to the report, Victoria Atkins, shadow environment secretary said: “Labour’s cruel Family Farm Tax is a disaster for our rural communities. Farms are on the brink of breaking, thanks to Labour’s vindictive decisions, with dire consequences for food security and rural communities.”