Latest news with #BusinessPropertyRelief
Spectator
6 days ago
- Business
- Spectator
Rachel Reeves risks killing off the family business
Changes to how inheritance tax and trusts are treated for non-doms have already put the nation's finances on shakier ground – something I revealed in a cover story last month. Now, a new report suggests these anti-business Treasury policies may risk killing off Britain's family firms too. Fresh analysis by the CBI's economics consultancy, commissioned by Family Business UK, warns that these changes to inheritance tax could jeopardise more than 208,000 full-time jobs over the course of this Parliament. That's more than the entire construction workforce in London. The report says that as small firms retreat from long-term investment, the wider economic consequences could be severe. The government is planning to reform Agricultural Property Relief (APR) and Business Property Relief (BPR) – two long-standing mechanisms that can offer up to 100 per cent exemptions from inheritance tax on qualifying land and business assets.
Telegraph
20-05-2025
- Business
- Telegraph
Reeves's inheritance tax raid will destroy generations of honest work
In 1891, Jonathan Fothergill became the managing director of Pickerings Limited, one of the oldest engineering firms in the country. Six generations later, the business remains in the ownership and management of the Fothergill family, trading out of its original site on Norton Road, Stockton-on-Tees. But the future of that unbroken family connection suddenly seems much less assured. For nearly 50 years, qualifying businesses have been allowed to pass assets down the generations without incurring inheritance tax. Business Property Relief (BPR), introduced by a Labour government in 1976, was designed to reduce the tax burden on transfers of business assets – encouraging the continuity of family businesses. That is set to change, striking at the foundation of family firms such as Pickerings Limited. Under new rules being brought into effect from April 2026 by Rachel Reeves, full business rates relief will only apply to the first £1m of a business's assets upon the owner's death. Everything above that threshold will be subject to 20pc tax. This policy change has been branded 'myopic' by its critics. It might yield a one-off tax hit, but then what? 'Family businesses are now going to have to sell in order to pay the tax bill,' fears Kiran Fothergill, a descendant of Jonathan and director of Pickerings Lifts – as the company is now known – who stood as a Conservative candidate in the last general election. 'What we are going to end up with is businesses being sold to possibly foreign owners,' or corporations, with future revenues heading out of the country, into off-shore companies or other clever tax structures. And with that, 'any feeling for the community or the history is lost'. 'Family businesses have a completely different time horizon to corporates,' Mr Fothergill explains – investing years into a business, building up a community of customers and employees. Corporate short-termism would likely mean job losses with generations uprooted. 'This policy change is a fallacy,' Mr Fothergill tells me. 'It's going to cost us as a society, and the structural damage to the UK economy would be irreparable.' Lance Forman, the fourth-generation owner of H Forman and Son and a former Brexit Party MEP, agrees. His family has been curing and smoking fish in the East End of London since 1905. ' Family businesses are very, very different to corporations. They are profit satisfiers, not maximisers. As long as they make enough for the families to maintain the standard of living they are used to, they are satisfied.' 'We take the good years with the bad years,' he adds. This is one star difference between family businesses and corporations, where the primary motivation is profit maximisation within a relatively short time frame – often through higher prices and job losses. Is selling the only option? Tax professionals tell me the looming BPR changes are increasingly dominating discussions, especially at board level. Mr Forman is sceptical of effective tax planning options available to his family. 'One other option would be to invest in an insurance policy, itself at a huge cost. But that would be instead of investing in the business. Where is the sense in that?' 'There's no incentive to build the business up for the new generation, to build a business for the future.' The removal of tax relief is rarely a popular event, but the benefit to the wider society in some cases can outweigh the costs. It is difficult to view the proposed changes as anything but a political miscalculation which strikes at the heart of business – aspiration.
Business News Wales
16-05-2025
- Business
- Business News Wales
UK Farmers 'Have Two-Thirds of their Wealth Tied up in their Farm'
On average UK farmers have two-thirds (66%) of their total wealth tied up in their land, equipment and livestock, new analysis from Rathbones, one of the UK's leading wealth management firms, reveals. For almost a third of farmers (30%) interviewed this rises to over three-quarters of their wealth. The vast majority of farmers see their farm not only as their livelihood, but as their future pension which will provide the bulk of their income when they retire, meaning many will face a significant financial shock in a year's time, when new inheritance tax rules come into effect in April 2026, Rathbones said. Rathbones study reveals nearly all of the farmers interviewed (96%) see their farm as their future pension and over half (52%) believe that they will rely on their farm to finance up to half of their cost-of-living expenditure once they retire. Around a third (32%) say it will provide between half and three-quarters of their retirement income and 16% believe they will be almost wholly reliant on their farm which will fund 75% or more of their living costs once retired. At the moment farmers are almost entirely exempt from inheritance tax, as they can use a combination of Agricultural Property Relief and Business Property Relief to pass on their farmland and other business assets to children or grandchildren tax free. But this is set to change in April 2026, with single farm owners only able to pass on up to £1.5 million of farmland and assets tax free, and those who jointly own a farm only able to pass on up to £3 million tax free. This increase in inheritance tax is a significant worry for farmers, as the Rathbones study reveals that 92% of those interviewed expect the next generation in their family to take over the farm and run it, once the current generation is ready to retire. More than nine in ten (93%) of those interviewed said that they think the next generation will be capable of successfully running the farm – but profit margins for many farms are already very tight and 30% of farms are already loss making. Profit margins are likely to be further affected if the next generation of farmers are saddled with additional taxes to pay. Adam Brewer, Investment Director with Rathbones Group, said: 'Even prior to the IHT change, many families have been forced to utilise their land differently by moving into higher margin sectors like caravan parks to subsidise their traditional farming operations. 'The latest tax change is likely to accelerate this struggle, threatening the continuing viability of smaller farms in the area.' Rathbones highlights some key changes to Agricultural Property Relief and Business Property Relief potentially impacting farmers from April 2026: Rates of Relief: The full 100% relief continues for the first £1 million of qualifying property, after which only 50% is allowed for the excess value. This means estates may incur significant IHT liabilities compared to the current situation where larger estates could claim full relief. The full 100% relief continues for the first £1 million of qualifying property, after which only 50% is allowed for the excess value. This means estates may incur significant IHT liabilities compared to the current situation where larger estates could claim full relief. Trusts: Both individuals and trusts will each have a separate £1 million allowance for qualifying assets. Trusts created before 30 October 2024 will retain their own allowances, while post-Budget trusts will share a single £1 million allowance. Both individuals and trusts will each have a separate £1 million allowance for qualifying assets. Trusts created before 30 October 2024 will retain their own allowances, while post-Budget trusts will share a single £1 million allowance. Lifetime Transfers: For gifts made after 30 October 2024, the new rules will apply if the donor dies after 6 April 2026. Gifts could potentially reduce IHT liability if the donor survives for seven years, allowing family members to pass on substantial assets tax-free. For gifts made after 30 October 2024, the new rules will apply if the donor dies after 6 April 2026. Gifts could potentially reduce IHT liability if the donor survives for seven years, allowing family members to pass on substantial assets tax-free. Instalment Payments: Estates can opt to pay IHT liabilities in equal annual instalments over 10 years interest-free, which provides some flexibility for affected families.
Business News Wales
16-05-2025
- Business
- Business News Wales
Business Owners Urged to Plan Ahead of Changes to Business Property Relief
A commercial insurer is urging family-owned businesses to prepare for potentially higher inheritance tax bills before proposed changes to Business Property Relief (BPR) come into force. As of April 2026, 100% Business Property Relief (BPR) – which allows qualifying business assets to be passed down free of inheritance tax – will be capped at £1 million per person. Only 50% BPR will be available on any excess value, meaning half the excess value will be included in the owner's inheritance tax calculation. Sean McCann, Chartered Financial Planner at commercial insurer NFU Mutual, said: 'While many of the headlines have focused on the impact of the Budget changes on the farming community, the cap on Business Property relief from April 2026 will have a huge impact on many business-owning families – including diversified agricultural and rural businesses. 'Business Property relief was introduced to protect and encourage the continuation of trading businesses, ensuring that on the death of the owner the family wasn't forced to sell assets or borrow money to pay inheritance tax. The changes to BPR are therefore understandably causing significant anxiety among many business owners. 'There are a number of steps business owners can do to mitigate the impact of the changes, and they should be proactive in preparing themselves for the future.' Three Top Tips for Business Owners Make use of both spouse's allowance Sean said: 'The £1 million Business Property Relief allowance is per person not per business. If you are married or in a civil partnership it can make sense from an inheritance tax planning perspective to ensure that each spouse is able to pass on part of the value of the business to the next generation on their death. 'Unlike the standard £325,000 tax free allowance and the £175,000 residence nil rate band that is available if leaving a share in your family home to a 'direct descendant', the £1 million 100% BPR allowance cannot be transferred to your spouse on death. If it isn't used it is lost. 'Every family and every business are different, so it makes sense to take advice based on your own circumstances.' Bring forward your succession plans Sean explained: 'It's likely as a result of these changes that many business owners will bring forward their succession plans. Any gifts made more than seven years before death normally escape inheritance tax. 'Although gifting assets or shares in a business can trigger a capital gains tax liability, it may be possible to claim gift holdover relief which can defer any capital gains tax until the new owner disposes of the assets or interest in the business. 'Currently, a business that qualifies for 100% Business Property Relief can be left free of inheritance tax without limit. Any capital gain that has accrued is wiped on the owner's death. This means should the family sell shortly after they can potentially escape both inheritance tax and capital gains tax. 'It's important to discuss with the next generation what their plans are. From next April there is the potential for a double tax hit if you gift the business during lifetime, die within seven years which triggers an inheritance tax bill, the family then sell shortly after your death and that triggers a capital gains tax bill on the held over gain. 'Whatever your plans, it's important to take advice on the options and the implications.' Check your partnership or shareholder agreements to avoid a nasty shock Sean said: 'Some partnership and shareholder agreements contain clauses that mean the ability to claim Business Property Relief is lost, which can lead to significantly higher inheritance tax bills. 'An agreement that contains a 'binding contract for sale' – meaning on the death of an owner the surviving business owners must buy the deceased's share of the business and the deceased's family must sell – will lead to the loss of Business Property Relief. The good news is this clause can be replaced with an 'option' agreement, which would give the surviving business owners the option to buy and the deceased's family the option to sell, which would preserve the relief. 'It's important to get your partnership or shareholder agreement reviewed to ensure you maximise the relief available and don't pay more inheritance tax than necessary.'
Belfast Telegraph
22-04-2025
- Business
- Belfast Telegraph
‘If a big firm bought my farm they wouldn't pay inheritance tax… but my children would'
Sam Chesney, a first generation beef and sheep farmer from Co Down, hopes to pass his 120-acre farm to his two children but believes IHT will prevent him from doing so. 'My children's inheritance tax will be in the hundreds of thousands. If Tesco or the National Trust were to buy this farm they would never pay inheritance tax. But if my neighbour buys this farm and he dies, he will pay it. Then they want another 20% inheritance tax with every successive generation which is ludicrous.' William Irvine, president of the Ulster Farmers Union (UFU) cites the case of a farmer with 'a significant farm business and the collateral in his mother's name. She is in her 80s with dementia and the farmer can do nothing. He just has to sit and wait. As it stands, he will have to sell a significant land amount of land [to cover the inheritance]. In that case, three generations of work is going to be wiped out.' IHT is prompting farmers to reassess the future and viability their profession, says William, a seventh generation dairy farmer from Mountnorris in Co Armagh. 'The civil servants within Treasury came up with this grand scheme. The Treasury, for whatever reason, has got this wrong.' Under changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) in the last budget, farmers with combined business and agricultural assets worth over £1m will be charged 20% IHT from April 2026. Since 1984, agricultural land, machinery, livestock, farm buildings and houses have been exempt from the tax. A government spokesperson told Ulster Business that reform to the Agricultural and Business Reliefs 'will impact around 500 estates a year. For these estates, inheritance tax will be at half the rate paid by others – with 10 years to pay the liability back interest free. This is a fair and balanced approach which will help fix the public services we all rely on.' The Treasury's assessment is in stark contrast to analysis from the Department of Agriculture, Environment and Rural Affairs (DAERA), published last December, which found that around half of all farms – an estimated 13,000 in Northern Ireland – could be impacted by inheritance tax changes. Farmers believe the Treasury severely miscalculated the true value of farms. Until now 'the advice from HMRC was 'don't worry about revaluing your farm during generational change because it didn't affect anything. It was just a legal process of transferring deeds',' William says. As a result, 'a true up-to-date valuation of farm business accounts was not in place.' Various factors push Northern Ireland farmers above the £1m mark, says Cormac McKervey, Ulster Bank's head of agriculture. 'The average price of land in Northern Ireland is around £15,000 an acre. In counties like Armagh it's £20,000.' Assets push this pricing further upwards. 'Add in the farmyard, buildings, dwelling house, the value of stock and machinery, and you're probably looking at £25,000 an acre.' At £25,000 an acre, a 40 or 50 acre sized farm will automatically trigger into inheritance tax. The average farm size in Northern Ireland is around 100 acres. Sam Chesney owns around 120 acres of land and rents ground as well. 'You couldn't live on the postage of 50 acres,' he says. There is no relation between the capital value of farmland and earning power from farming, which is valued at 1% to 2% per annum in Northern Ireland, according to Cormac. 'If a farm has 100 acres – a standard family farm in Northern Ireland – in theory it is worth £2m. It generates enough money to just about meet its commitments but in no way does it ever generate the amount of money needed to capture an inheritance tax bill.' Farmers will be able to pass on farmland without paying IHT as long as the donor lives for seven years after the transfer is made. But spreading collateral across children comes with cost and risk, says William. 'A teenager, for example, is not well enough saddled on life's journey to know whether he wants to spend the rest of his life on a farm or whether he has other ambitions.' The UFU president is passing his collateral to his son 'in the hope I will live for the next seven years. If I'm fortunate, with the help of God, I will do that. But if I was 80, that's a far bigger question. If I was 40, the next generation isn't at the stage that's a viable possibility. It's a lottery.' Famers facing a £200,000 IHT invoice for a farm valued at £1m might have to sell off land in order to make the payment. Sam Chesney equates this to 'a builder or a plumber selling his van or a shopkeeper selling part of his shop floor'. Another option would be to borrow money to cover the debt. 'The problem with [loans] is that the land doesn't generate the return that other business assets might do – it's a long term gain,' Cormac says. Farmers have organised mass protests calling for the government to reverse course. Fifty UFU members recently attended a Pancake Day Rally in London and farmers brought along machines required to grow pancake ingredients – a combine, sugar beet harvester, tractor, seed drill, and a crop sprayer - in order to highlight the monetary investments required to produce food. The UFU has been involved in intensive lobbying. 'I feel we are winning this argument everywhere apart from at number 10 [Downing Street],' says the union's president. 'If we go quiet on this, the government will think they've won, so we need to keep the pressure on.' Although farmers have explained the facts and figures for what they believe is the Treasury's miscalculation, the government has yet to budge. In a statement, a government spokesperson highlighted a £5bn commitment for farming in the last budget which includes schemes directed at sustainable food production. The budget also included £60m through the Farming Recovery Fund and the establishment of a new British Infrastructure Council to steer private investment in rural areas. Farmers believe all is not lost. There is a 'window of opportunity for the government to pause, consult or change [the proposed legislation]', William says. The window will not be open much longer though. Following the autumn budget this year, a finance bill will cement changes to APR and BPR in legislation. 'Our commitment to farmers remains steadfast and our Plan for Change will protect food security and grow the rural economy,' the government spokesperson told Ulster Business. Farmers are not so sure. 'We produce food in Northern Ireland for 10 million people, even though there's only a million and a half of us [in the province],' says Sam Chesney. 'The world is a very difficult place at the minute. A country lives and survives on its stomach.' Cormac McKervey, Ulster Bank's head of agriculture, recommends that farmers 'get good legal and financial advice from their accountant or solicitor' and don't take knee-jerk reactions. 'Sit down and plan this out. It's a very emotive subject for farmers but you need to take the emotion out of it and ask, 'What is my long-term business plan?' This will open up a discussion about succession. Sometimes it is not discussed until the farmer dies. But now there will hopefully be a more open and honest conversation about planning for succession.'
