GMB: Farmer debates inheritance tax row with Bill Rammell
Moves to impose inheritance tax on family businesses and farms could deliver a bigger blow to economic growth and government tax income than it raises, it is claimed.
A new analysis claims the net loss caused by the controversial measure included in the October budget could be as much as £1 billion.
Number crunchers at CBI Economics argue that the Treasury has “underestimated the impact” of changes to inheritance tax exemptions available through business property relief (BPR), with the majority of family businesses forced to cut investment because of the raid.
Under a worse case scenario it is claimed that requiring inheritance tax to be paid when family businesses are passed on could stunt their growth, resulting in around 125,000 fewer jobs.
Overall, the loss of economic activity could lead to a £2.6bn reduction in income from taxes such as corporation tax, income tax and national insurance over the next five years, the research suggests.
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This is much more than the estimated £1.38bn in extra inheritance tax that Ms Reeves hopes to raise from cutting BPR, meaning that the Exchequer will be £1.26bn worse off than under the status quo.
Trade groups representing 160,000 family-owned businesses have called on the Chancellor to reconsider the changes by launching a consultation.
The letter, organised by Family Business UK and signed by groups including the National Farmers Union, British Independent Retailers Association and Hospitality UK, warns that the economy will be “starved of much-needed investment leading to forced, premature business sales and the loss of jobs in constituencies across the country”.
Neil Davy, the chief executive of Family Business UK, said: “Already, family business owners are taking decisions to withhold planned investments and are putting recruitment on hold.
“Those working for family businesses are also extremely concerned, worried about how these changes might impact them.
“We do not believe that these are the outcomes the Government envisaged. So, we are calling on the Chancellor to meet and run a formal consultation, to find a solution that will protect the long-term interests of family businesses and farms and, crucially, the jobs and investment they provide.”
Kemi Badenoch, the Conservative Party leader, is due to cite the research in a speech in London on Monday as she warns that “no one is safe” from Labour’s tax raid.
Speaking at the Business Property Relief Summit, Mrs Badenoch is expected to say: “Keir Starmer and Rachel Reeves spent months, years even, on a charm offensive to convince businesses they had nothing to fear from a Labour government.
“Within weeks of taking office, they unleashed the worst raid on family business in living memory. They promised to get growth going. Instead, growth is going backwards.
“Keir Starmer’s decisions will drain investment and growth out of the British economy. And no one is safe. Businesses small and large, rural and urban, whether they make goods or provide services.
“The warning from Family Business UK that Labour’s changes to BPR could lead to 125,000 job losses is chilling. For some context, that figure is equivalent to the entire population of Blackburn.”
The changes to BPR mean that a 20 percent levy will be charged on inherited business assets over £1m when someone dies. Agricultural property relief (APR) is also being limited, meaning farmland will be taxed in the same way.
Nigel Farage hit out at the inheritance tax changes. He told the Telegraph: “Rachel Reeves is no economist. Her Budget measures and total lack of understanding of the private sector is driving us into recession.”
A new analysis claims the net loss could be up to £1 billion (Image: Getty)
Tim Farron, the Liberal Democrat environment spokesman, said: “Farmers have had to deal with botched trade deals, endless amounts of red tape and now this tax hike from the Chancellor will hit farmers even harder leading to the collapse of so many family farms and countless jobs.”
The economy unexpectedly shrank for the second consecutive month in October and some business figures fear the UK could slip into a recession.
James Reed, the boss of Reed, which is one of the UK’s largest recruiters, told the BBC that there has been a 26 percent fall in jobs advertised.
“That worries me because when I’ve seen that in the past, it’s been an indication that recession is around the corner,” he said.
A Treasury spokesman said: “Our commitment to business is resolute – we have capped corporation tax at 25 percent, confirmed full permanent expensing, and are committed to working together with business to unlock more growth opportunities for our country.
“With our public services crumbling, a £22 billion inherited fiscal black hole, and only 158 estates benefitting from over half a billion pounds in business property relief in 2021-22– more than half the total value – we had to make difficult choices to fix the foundations of the country and restore economic stability so businesses can thrive.
“We have set out our modelling on the impacts of the changes to BPR at the Budget, and, as is standard practice, we will publish further analysis of the impacts alongside the draft legislation expected in 2025.”
