Labour tax raid on farmers to cost Treasury up to £2bn

Yahoo

2 days ago

Rachel Reeves's tax raid on farmers will cost the Treasury almost £2bn, analysis has found, despite Treasury claims that it could boost the public purse by as much as £1.8bn.
Inheritance tax reforms due to come into force next April will cause family businesses to slash investment and jobs and lead to a slowdown in the economy, according to independent consultants at CBI Economics.
Its estimates suggest that changes to business property relief (BPR) and Agricultural Property Relief (APR) will backfire and, instead of saving money, it will cost the Treasury £1.9bn by 2030.
Under the changes, inherited farms worth more than £1m will be taxed at a rate of 20pc after having been shielded from the levies for decades – while a 20pc rate will also be charged on inherited business assets over £1m when someone dies.
The Government has said it is expecting to raise £1.8bn from family-owned businesses and farms from the reforms by 2030.
Analysis from the Office for Budget Responsibility last October said this estimate accounted for how business owners and farmers would respond to the policies, although admitted the costing had a 'high degree of uncertainty'.
Family Business UK, the industry group which commissioned the research, said: 'Far from increasing tax receipts into the Treasury and stimulating the economic growth the Government is trying to deliver, the changes to BPR and APR in the October Budget achieve the opposite.'
The organisation said the Government risked 'inadvertently undermining [its] mission of sustained economic growth, which we agree is an absolute necessity to deliver prosperity and improved living standards for working people'.
The analysis found that more than 60pc of family businesses and farms were planning to reduce investment by over a fifth in light of the changes.
Around a quarter have already cut staff. By the end of this parliament, more than 200,000 jobs are expected to be lost, the research showed. Areas including Yorkshire, the East of England and Northern Ireland are expected to be the hardest hit.
It comes amid a growing backlash over the inheritance tax raid and calls for the reforms to be delayed.
Charities have reported a surge in calls from distressed business-owners. In November, John Charlesworth, 78, took his own life after his family said he had been 'eaten away' by fear of the tax raid.
Neil Davy, chief executive of Family Business UK, said the findings showed 'just how far-reaching, and immediate, the impact of these policy changes is'.
He added: 'No industry, sector, region or parliamentary constituency will be immune... The Government must urgently reconsider these policy changes.'
Tom Bradshaw, president of the National Farmers Union, said: 'This report must serve as a wake-up call to Treasury, or we face major cuts to investment and significant job losses.'
Mo Metcalf-Fisher of the Countryside Alliance said: 'It would be an act of foolishness to ignore the very real and irreversible damage these changes pose to the stability of the agricultural sector.'
Meanwhile, Andrew Griffith, the shadow business secretary, said: 'Labour plan to steal the futures of a generation of entrepreneurs on the back of some hooky treasury maths and a blatant breach of election promises.
'The Conservative position is crystal clear. A family business death tax has no place in a society where we celebrate risk takers and wealth creators. No if's or buts. Our first Conservative budget will reverse this damaging measure.'
Separate data published on Monday showed the impact Labour's tax policies are having on the economy.
Estimates compiled by former Treasury economist Chris Walker found at least 10pc of non-doms have already left the UK in the wake of Labour's crackdown.
If more than 25pc of non-doms leave the UK, forecasts suggest the Treasury would start losing revenue. Analysts have suggested the crackdown on non-doms could cost the UK more than £10bn a year in lost economic growth.
A Treasury spokesman said: 'Our reforms to Agricultural and Business Property Reliefs will mean three quarters of estates will continue to pay no inheritance tax at all, while the remaining quarter will pay half the inheritance tax that most estates pay, and payments can be spread over 10 years, interest-free.
'This is a fair and balanced approach which helps fix the public services we all rely on'