Landowners welcome HS2 Select Committee support on taxation reform

06 March 2015

The CLA has welcomed action taken by the Chairman of an influential committee of MPs in support of the CLA’s call for taxation reform.

The HS2 Select Committee’s Chairman has written to HM Treasury highlighting the unfairness of the current Capital Gains Tax (CGT) and Inheritance Tax (IHT) regime. The current system could leave rural businesses affected by Compulsory Purchase Orders for major infrastructure projects struggling to survive.

The letter suggested that the Committee would recommend a change to the HS2 Bill if the Treasury did not change both taxation systems.

The CLA, which represents landowners, farmers and rural businesses, gave evidence on this issue to the HS2 Select Committee in November 2014.

CLA President Henry Robinson said: “The CLA is calling for fair treatment for rural businesses affected by Compulsory Purchase Orders and we have taken up the matter of CGT and IHT reform with the Treasury on several occasions. We have also raised it with the Secretary of State for Transport and the two Ministers with responsibility for HS2 Phases 1 and 2. 

“It is time that the Treasury admits the taxation system as it relates to compulsory purchase is broken. Reform should be instituted immediately to ensure that those already suffering as a result of HS2 do not suffer a further battle with HMRC.”

Under the current regime both CGT and IHT will have a major impact on landowners subject to Compulsory Purchase Orders for HS2 because of the size of the scheme. 

Mr Robinson adds: “Replacement land will be in high demand as so many landowners are subject to HS2 Compulsory Purchase Orders not only for construction of the railway but also for use as soil storage and for creation of environmental habitats.  CGT roll-over relief is time limited and replacement land in which a landowner can invest their compensation may not be available when needed by the business. CGT rules also limit the ability of individuals to invest their compensation in replacement buildings on the land they retain. 

“IHT will also have an important impact on the landowners, farmers and business operators affected by HS2 because completion of the scheme will take in excess of 15 years from when the route was first announced. Under the current tax regime the successors of landowners who die during this period could face years battling with the HMRC over the taxation implications of the scheme that has decimated their family’s business.”

Read the HS2 Select Committee Chairman’s letter to HM Treasury here.

Read the CLA’s evidence on CGT and IHT tax reform given to the HS2 Select Committee on 17 November 2014 here