The small change to inheritance tax for farm businesses is nowhere near enough to protect many family farms and does nothing to remove the cruel impact of the policy on elderly and vulnerable farmers, says the NFU.
Since changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) were first announced and independent tax experts have suggested changes to make it more targeted.
In her Budget speech the Chancellor announced a small change to the rules, which will allow those farmers who are married, or have deceased spouses, to transfer their inheritance tax allowance to one another if one of them dies having not used their allowance.
NFU President Tom Bradshaw said: “It’s good to see the government accepts its original proposals were flawed. But this change goes nowhere near far enough to remove the devastating impact of the policy on farming communities.
“It’s only right that agricultural allowances can be transferred between spouses and it’s something we’ve been calling for, but it doesn’t go anywhere near far enough in protecting the working people of the countryside. It does nothing to alleviate the burden it puts on the elderly and vulnerable.
“The Chancellor said she wanted to ‘back working people not make them poorer’ and to ‘increase investment not cut it’. To do that, the Government must look again at the multiple solutions that have been put forward by industry and tax experts.”
The NFU suggests minimal movement on the family farm tax comes alongside a range of other announcements in the Budget that could increase inflationary pressures on our food system.
Mr Bradshaw continued: “Several other announcements in the Budget will hit farming and growing businesses hard. The increase in the National Living Wage, which will have risen 12% in two years, puts further cost pressures on agricultural and horticulture businesses and further inflationary pressures on our food system. At a time when the government has an ambition to get the country eating more fruit and vegetables, it will hit the horticulture sector hardest.
Paul Fairbairn, of law firm Cripps said Rachel Reeves has taken a step in the right direction. “The changes will spare many families unnecessary asset restructuring and will allow them to pass up to £3.3 million of business or farming assets to the next generation. It corrects what many viewed as an unfair anomaly and marks a rare instance of the government listening to public outcry and diluting a legislative change.
“However, it will not undo the fact that many such businesses will now be subject to inheritance tax for the first time ever, which in turn will have a significant impact on their ability to grow and generate wider economic activity. Given the relatively modest revenue this reform is expected to generate, it is a shame that the Chancellor has not acted more emphatically.”
