Comprehensive research into the impact of the Government’s proposed changes to Inheritance Tax reveals the devastating effect it could have on the hundreds of thousands of family-run businesses in the UK.
Led by Family Business UK (FBUK) with support from 32 trade associations, and conducted by CBI Economics, it revealed that every sector of the economy and every region of the UK will be hit as family businesses and farms cut jobs and investment.
Tom Gauterin, director who specialises in Trusts, Estates & Tax at national law firm Freeths, said: “FBUK’s report backs up what many clients have been saying: the Government’s planned changes to APR and BPR are going to be detrimental to a wider range of businesses than had been claimed.
Although most of the attention following the October Budget has focused on farms, the restriction on BPR will affect family-owned businesses in every sector. Many of these will be smaller enterprises for whom a sale is neither intended nor possible – and on which the impact of a 20% IHT charge would be huge. A further problem is that, as IHT is payable by an estate rather than the business itself, cash to pay that tax may need to be extracted as (taxable) dividends, making the real cost closer to 30%.
Undertaking some planning before the changes take effect is possible, but some of the options – gifts to children or employees, a sale, buying insurance, or even moving abroad – may be neither commercially viable nor suitable for other reasons.
Given how widespread the effect of these changes is likely to be, it would be welcome if the Government were to review its policy given the risks to UK SMEs that this report identifies.”
Although the report says all sectors will feel the impact of IHT changes, agriculture and horticulture are projected to be particularly hard hit, with average investment expected to decline by 17%.
The report also predicts that capping APR at £1m will result in more than 28,300 job losses in the farming sector and its supply chains.
NFU President Tom Bradshaw shares the sentiment: “This report shows too clearly the catastrophic impact on family farming businesses across the UK. This report must serve as a wake-up call to Treasury, or we face major cuts to investment and significant job losses.”
To read the report visit: familybusinessuk.org | Taxing Futures: The economic and fiscal implications of changes to BPR & APR for UK family businesses and farms.
