Inheritance tax protests

Continuing protests on inheritance tax changes, Farmers returned to Whitehall, London this week (Tuesday, March 4th).

This latest protest comes hard on the heels of the publication of the Government’s consultation on how the changes to APR and BPR will apply to trusts. 

This consultation is concerned with the technical detail of how the new policy will work. Concerningly, there is no sign at all that the Government has listened to any of the wider points raised about the effect of limiting the scope of APR and BPR available to farms and other businesses.

To recap: the original policy (ostensibly intended to target investors using farmland as a tax sheltering device) was based on incorrect assumptions (farms are not the same as death estates, and most farming estates will claim BPR in preference to APR), and appeared to take no account of the reality that the high capital values of farms are wildly out of sync with their (notoriously limited!) income generating potential.

As things stand, it is likely that some farmers will bow to the inevitable and sell up. There is no guarantee that agricultural land will continue to be used for food production post-sale, so this has far-reaching implications for the UK’s food security – a point that has been notably absent from any Government comments.

This policy remains a blunt instrument that might have been designed to make farms go to the wall. Multiple tax advisors have proposed alternatives that would more effectively target investors without harming active farmers. The two most obvious are that the definition of ‘working farm’ could be tightened up; easier still, a full exemption on death but with a clawback mechanism in the event that the farm is sold within (say) ten years.

It seems that, to the extent possible before 6 April 2026, it may still be advantageous to transfer a farm (or business) into trust, as the ongoing charges of up to 3% every ten years may be more manageable than the alternatives.

For farmers who are looking at their options and need help crunching the numbers, Freeths has a large and experienced team of tax and agricultural lawyers who can advise on the most cost-effective way forward.