CLA urges government to ‘stop and think’ about long-term changes to inheritance tax

This week, the Environment Food and Rural Affairs (EFRA) Committee held its first session looking into the future of farming. The purpose of the session was to explore the impact the proposed changes to inheritance tax (IHT) would have on rural businesses.

Two panels appeared in front of the MPs. The first focused on tax experts with Jeremy Moody from the Central Association of Agricultural Valuers (CAAV), Stuart Maggs from Howes Percival, David Sturrock an economist from the Institute for Fiscal Studies (IFS) and Dr Arun Advani Director for the Centre for Analysis of Taxation (CENTAX) .

While Dr Advani and the IFS have been strong supporters of the chancellor’s proposed changes announced in the budget, both Jeremy Moody and Stuart Maggs have been vocal in opposition due to the impact it would have on rural businesses.

This first panel largely focused on the ability of farmers and rural businesses to pay the proposed tax bills. Both CENTAX and the IFS admitted they had yet to do any modelling around the affordability of the changes and hoped to report on this in the spring. This was a surprise to many MPs because the Treasury has used both bodies several times to justify the changes.

MPs were also taken aback by Jeremy Moody’s statistic, that 46% of farmers are held by a single person, with the government regularly arguing that the allowances will be higher as married couples will be able to share an allowance. There were several common misconceptions resolved within the first session, as panellists explained that while it was possible to pass on a farm using the seven-year rule, the gifter cannot receive any benefit in kind (eg. remaining to live in the farmhouse for free) which is simply impossible for many families.

The second panel was focused on the direct impact of farmers and rural businesses featuring CLA President Victoria Vyvyan, National Farmers Union (NFU) President Tom Bradshaw and National Chair of the Tenant Farmers Association (TFA) Robert Martin. All of the panellists, when asked if they had been consulted about the proposed IHT changes, confirmed they had not. Each declared that they had made representations to the Treasury ahead of the budget stating that this course of action would be a mistake.

All members of the panel agreed that the UK Government must open a consultation into the proposed changes, and fully impact assess what the changes would do to the sector. Victoria said it was time to “stop and think” before any kneejerk decisions were made for the long-term.

There was an emotional element to the session when Tom Bradshaw described the intense worry being placed on many farming families with the proposed changes. The committee took a moment to thank the hard work many farmers are doing and encouraged those struggling to seek mental health support if required.

Overall, the committee was receptive to the arguments put forward by both of the panels, and there was an overall tone that the policy needs to be amended. The CLA will continue to work with MPs across the House of Commons, the Treasury and Defra to make sure that any changes work for the rural economy.

The full session is available to watch here.