Government ‘deaf’ to industry concerns about inheritance tax

The CLA is calling for a ‘clawback’ mechanism that could generate a similar revenue without the disastrous consequences of the government’s current inheritance tax reforms.

In a meeting with Treasury Minister James Murray MP, Exchequer Secretary to the Treasury and Farming Minister Daniel Zeichner today (Tuesday, 18 February), the CLA, along with other industry organisations presented the clawback option.

It was hoped that the Treasury had come to listen to the shared expertise of the agricultural industry, but that was not the case. The government showed no enthusiasm or appetite for compromise. The Treasury minister failed to acknowledge our reasonable concerns about the current government policy or demonstrate a willingness to work with us to improve it to protect rural businesses.

Following the meeting, the CLA joined the other organisations – NFU, Tenant Farmers Association (TFA), and the Central Association of Agricultural Valuers (CAAV) – in a press conference to discuss the clawback option and answer questions from numerous national and trade journalists present.

CLA President Victoria Vyvyan said: “The Treasury was simply going through the motions and showed no interest in farming or family businesses, and the economic damage that they are inflicting.

“The CLA could not have made the facts clearer to the Treasury: this inheritance tax policy is already inflicting damage on the economy and is likely to end up hitting tax revenues.

The CLA has suggested retaining 100% agricultural and business property reliefs (APR and BPR) for qualifying assets. However, inheritance tax would be applied to these assets if sold within a certain time period post-death, payable out of the proceeds of sale.

To ensure that this clawback mechanism does not damage ongoing businesses that sell assets to reinvest in their business, the clawback provision should not apply to APR and BPR assets which are sold where the proceeds of sale are reinvested in the business.

This policy position came following discussion with CLA committees on options to put to the government to mitigate the impact of its change to inheritance tax.

The CLA expects this could generate a similar figure to what the government claims its own policy of capping vital inheritance tax reliefs for farms and family businesses would achieve, and is calling on the Office for Budget Responsibility to model the proposal.

Victoria adds: “The clawback that the CLA and other stakeholders propose could limit the damage to businesses. It would allow rural and other family businesses to continue to make medium and long-term investment decisions, unlocking the stalled growth in business investment in the rural economy and keeping land in production.

“This plan would also target those who have bought land to shelter wealth for short-term gain, and will still deliver revenue that the Treasury needs.

“The CLA will not give up, we will carry on campaigning against the current disastrous policy, and the government has to work with us and commit to finding a solution in time for the spring statement.”

The CLA believes other alternatives, such as transferability of the £1m APR/BPR allowance or a relaxation of the seven-year rule on gifting, would not be enough to help businesses or address the shortcomings of the current policy.

The CLA has argued that the government’s cap could affect 70,000 UK farms, some as small as 100 acres. It will also have a detrimental impact on farm profitability, with an average 350-acre English arable farm owned by a couple needing to spend 99% of their yearly profit over a decade to afford their inheritance tax bill.