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.
The CLA and other farming industry leaders met with James Murray MP, Exchequer Secretary to the Treasury, and Farming Minister Daniel Zeichner today (Tuesday). The organisations presented the clawback alternative as a way of mitigating some of the consequences and anomalies of the policy announced in the autumn Budget, but the government showed no enthusiasm or appetite for compromise.
The CLA has suggested retaining 100% agricultural and business property reliefs 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.
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.
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 Chancellor has previously asked for solutions, we have presented a compelling alternative but the government is deaf to the possibility.
“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.
