Major new survey forecasts job losses and shrinking Treasury revenue as a result of IHT changes

A major new survey into the impacts of the government's inheritance tax changes has painted a bleak picture of job losses and cancelled investment.

But it has also found that cutting IHT reliefs for farmers and family businesses will hit the Treasury's own revenue - at odds with the government's desire to raise extra funds.

The study, which the CLA supported, into the economic and fiscal impacts of changes to both BPR and APR, commissioned by Family Business UK and conducted by independent consultancy CBI-Economics, is the largest yet into how the family business and farming sectors will respond to measures announced in the autumn Budget. More than 4,000 businesses and farms across the UK took part in the research, including many CLA members.

It found that more than 200,000 jobs could be lost during this Parliament, while the changes could produce a net fiscal loss of £1.9 billion for the Treasury and wipe £14.9bn from the economy in lost business activity.

Almost a quarter (23%) of family businesses and almost one in five family farms (17%) have cut jobs or paused recruitment since the Budget. The findings also reveal that more than half (55%) of family-owned businesses and just below half (49%) of family farms have paused or cancelled planned investments.

Country Land and Business Association (CLA) President Victoria Vyvyan said:

“The Prime Minister recently told the Liaison Committee that the only reason the government is capping vital inheritance tax reliefs is to generate more revenue. As this comprehensive new report shows, tax revenue will in fact fall, with hundreds of thousands of jobs lost in the process.

“The government’s case is collapsing under increasing evidence that shows these reforms will inflict lasting damage on farms and family businesses. The Prime Minister must be called back to the committee to explain himself.

"When the Chancellor announces billions of pounds of cuts this week, we should remember that the whole country is paying the price for the government's unnecessary attacks on farmers and family businesses."

The CLA has put forward an alternative proposal to the Treasury, known as the clawback option. Tax would apply on inherited assets sold within a certain time period post-death if the proceeds are not reinvested into those continuing businesses.