Rachel Reeves 'blind and indifferent' to damage of inheritance tax changes, CLA says
The Treasury is “deaf, blind and indifferent to the damage to the economy” from the changes to inheritance tax, farming groups have said.
Country Land and Business Association (CLA) President Victoria Vyvyan claimed the “ending of vital inheritance tax reliefs will crush farming and family businesses”, before adding: “This government is incapable of listening.”
Ms Vyvyan’s comments came after the Government published draft legislation and the impact assessment of the proposed changes to agricultural (APR) and business (BPR) property relief.
The changes, which will come into effect next April, would introduce a 20 per cent inheritance tax rate on agricultural land and businesses worth more than £1m.
This would scrap exemptions which meant that no tax was paid to pass down farms and other rural firms to family members.
The Government has continued to defend its “fair and balanced approach which helps fix the public services we all rely on”.
The plans have faced intense opposition from the sector, which says cash-poor, asset-rich farmers will be forced to sell their land.
In its impact assessment, the Government claims that only 2,000 estates will be affected.
It says it "is not expected to have a material impact on food security", but admits the policy "will have an impact on families going through bereavement and those planning for succession”.
The policy is expected to raise just £230m for the Treasury in the first year, and £520m a year in the following years.
However a recent survey from CBI Economics found that Yorkshire is set to lose 16,500 jobs and have more than £1bn wiped from the economy, due to agricultural businesses cutting back on investment.
The CLA is one of several groups to call for the Government to use a clawback mechanism for inheritance tax.
This would see tax applied at the full 40 per cent rate on inherited assets sold within a certain time period post-death if the proceeds are not reinvested into farming businesses.
“The CLA has made clear, and costed, the consequences of this ideological folly; the loss of jobs, the reduction in GVA (gross value added),” Ms Vyvyan added.
“Together the industry has offered a sensible alternative via the ‘clawback’ mechanism. The Treasury has given no reason for failing to consider an alternative.”
This method of collecting inheritance tax is backed by the cross-party Environment, Food and Rural Affairs (Efra) Committee, which has a majority of Labour MPs.
However a Government spokesperson said: “A clawback mechanism would raise less revenue, make tax complexity worse and would not address ultra wealthy non-farming landowners using this relief to avoid paying higher tax elsewhere.”
They added: “The note sets out the economic and equalities impacts, and that most estates claiming the reliefs will be unaffected by the changes.
“The latest data shows that 40 per cent of Agricultural Property Relief - worth £219m - was directed to just 117 estates.
“The money raised will go towards public services we all rely on daily instead.”