War of words over farm inheritance tax and finances shows no signs of abating
The war of words surrounding the government’s proposed changes to inheritance tax on farmland shows no sign of abating, with experts and industry bodies lining up to contest claims and calculations.
While the organisers of last week’s unprecedented farmers protest in Thirsk emphasised their main issue was being fairly reimbursed for their work, others are continuing to claim up to 75,000 individual farm business owners would be affected by the tax changes over the coming generation.
The Government has insisted only 27 per cent of farms would be affected by changes to Inheritance Tax (IHT), namely Agriculture Property Relief (APR).
In sharp contrast, the NFU has claimed 75 per cent of farms stand to be above the £1m threshold.
In a letter to Country Post, Steve Langton, a statistician formerly in charge of the June Agricultural Survey for England, said the Country Land and Business Association’s (CLA) claim 70,000 farms would be impacted was “undoubtedly an overestimate”.
He said the the CLA’s numbers related to agricultural holdings, adding “a holding is not the same as a farm”. Mr Langton said: “Whilst many small farms consist of a single holding, bigger farms tend to have become big by buying other farms, and therefore have multiple holding numbers.”
He added due to the highly variable differences between farms in the value of assets and the personal circumstances of the farmers, he did not believe it is possible to get a decent approximate figure for the number of farms affected from published agricultural statistics.
Nevertheless, the Central Association of Agricultural Valuers said it had calculated more than five times the Government’s prediction would be affected by the change.
“The Government’s data may come from correct answers to the questions it asked, but by basing them on agricultural property reliefonly, it has missed large parts of farming,” said Jeremy Moody, secretary and adviser to the CAAV. “Even allowing for almost any plausible margin of error, it is reasonable for large numbers of farmers to expect to be adversely affected. More widely, privately owned businesses - accounting for 30 per cent of the UK economy - face the same changes to business property relief and will also be affected.”
The Institute for Fiscal Studies has further complicated the debate this week saying if the government is going to have an inheritance tax, it should be applied to all assets and if the government wants to encourage food production, or some other specific use of land, it should support this directly.
David Sturrock, senior research economist at the institute, said the government could consider mitigations such as making unused portions of the new £1 million allowance inheritable by a spouse or civil partner, as happens for the main inheritance tax allowances.
He added: “If the government wished to give current farm owners the same opportunity to avoid inheritance tax as owners of other assets, it could, for example, make lifetime gifts of agricultural property made before a certain future date inheritance tax free, regardless of the timing of the death.”
The NFU said a poll had shown changes to inheritance tax on family farms are unpopular, and that perceptions that Labour does not value rural voters as highly as urban ones are building.
The poll found 65 per cent of the public do not think that the Government has fully considered the impact of its planned changes on family farms.