Delay inheritance tax reforms to avoid damaging family farms, cross-party MP report urges

Delaying the policy until April 2027 would also protect vulnerable farmers who would have “more time to seek appropriate professional advice”.

The cross-party Efra Committee has a majority of Labour MPs, and is the biggest rebellion against the policy since the Chancellor announced it in the Budget.

The proposals would introduce a 20 per cent inheritance tax rate on agricultural land and businesses worth more than £1m, essentially scrapping an exemption which meant no tax was paid to pass down family farms.

This is a reduction on the main inheritance tax rate of 40 per cent.

The plans continue to face intense opposition from the sector, which says cash-poor, asset-rich farmers will be forced to sell their land and investment will stall.

Efra Committee chair Alistair Carmichael told The Yorkshire Post that the policy would “inevitably” damage family farms.

The Liberal Democrat MP said: “The Treasury clearly does not understand the nature of family farm financing.”

He explained that in his constituency of Orkney and Shetland, the average value of a family farm is £3m - leaving an inheritance tax liability of £400,000.

Across Yorkshire, these figures are likely to be much higher.

“The only way you will pay that inheritance tax bill is by selling land and probably the whole farm,” he said.

“You’re not going to be selling that land to another farmer, you’ll be selling it to someone who is going to use it for housing, renewable energy or, just as happens at the moment, with people who want to shelter money from inheritance tax in land.”

“That’s the real mischief here,” Mr Carmichael said, explaining that the Efra Committee very much supported the Government’s aim of closing a loophole which allows investors to buy farming land to avoid inheritance tax.

“The way the Government does it penalises the people that they say they want to protect, while it protects the people who say they want to penalise.

“At 20 per cent it’s still a good deal for someone with a lot of money, who wants to put money into land.”

The committee has called on the Government to do a proper impact and affordability assessment.

MPs say currently the impact of the changes “on family farms, land values, tenant farmers, food security and farmers in the devolved administrations” is “disputed and unclear” with a risk of producing unintended consequences, adding that “reforms threaten to affect the most vulnerable”.

They urged the government to consider the clawback mechanism, as proposed by the National Farmers’ Union, which would introduce an inheritance tax liability if farming assets are sold within a seven-year period from death.

A government spokesperson said: “Our reforms to Agricultural and Business Property Relief will mean 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.

“We are also investing £5bn into farming over the next two years, the largest amount for sustainable food production in our country’s history, and are going further with reforms to boost profits for farmers by backing British produce and reforming planning rules on farms to support food production."