Latest news with #CenTax
The Independent
4 days ago
- Business
- The Independent
Tractor tax more likely to hit working farmers than wealthy landowners, think tank tells Reeves
Rachel Reeves should water down her inheritance tax raid on family farms to protect workers, according to a think tank that championed the controversial Labour policy. The Centre for the Analysis of Taxation (CenTax), which has been broadly supportive of the idea of a so called 'tractor tax', warned that landowners were 'less likely to be impacted by the reform than working farmers '. The move will increase pressure on the chancellor over her plans, which critics say could sound the death knell for many family farms. The changes mean that farms valued at £1m or more will be liable for 20 per cent inheritance tax. The Treasury says that, with tax allowances, in reality only farms worth £3m would be affected – around 28 per cent of family farms. But official Defra figures appear to suggest as many as 66 per cent could be hit. Ministers have defended the changes, saying that they had to take 'difficult decisions' in the wake of what Labour says was a £22bn black hole in the public finances left by the last Tory government. However, CenTax has now said that working farmers are more likely to suffer under the policy, despite Labour's claim to protect working people. It suggested two ways the policy could be better targeted, including capping inheritance tax relief to the first £10m of a claim to allow 100 per cent relief to £2m per estate. It also suggested a 'minimum share rule', to remove inheritance tax relief for passive investors in farmland, so they cannot be used as a 'tax shelter'. Last year, minister Daniel Zeichner told MPs the government had introduced the plans to protect small fares. He said: 'Currently, small farms can find themselves facing the same levels of tax bills as much larger farms, despite having a much smaller asset. Twenty per cent of agricultural property relief is claimed by the top 2 per cent; 40 per cent is claimed by the top 7 per cent. 'That is not fair, it is not sustainable, and sadly, it has been used in some cases by wealthy landowners to avoid inheritance tax. That is why the Government has announced plans to reform agricultural property relief.' CenTax found just 20 per cent of landowner estates would be hit by the tax, compared to 25 per cent of tenant farmer estates, 45 per cent of owner-farmer estates, and 67 per cent mixed tenure estates. CenTax said: 'Landowners are less likely to be impacted by the reform than working farmers, representing 64 per cent of all farm estates but 42 per cent of impacted farm estates. Owner-farmers represent 17 per cent of all farm estates but 37 per cent of impacted farm estates.' Mo Metcalf-Fisher, from the Countryside Alliance, said: 'Labour ministers repeatedly say they want to protect genuine family farming businesses, while tackling tax avoidance, through inheritance tax changes. 'The evidence, however, points to it being these very families and their farms that will be badly impacted by the policy, as it stands. 'There is still time to listen to experts from the farming sector and rethink the policy before it's too late.' Ms Reeves is currently under pressure to find a £50bn hole in the government's finances, according to the National Institute of Economic and Social Research.
Telegraph
5 days ago
- Business
- Telegraph
Think tank that championed farmer tax raid tells Reeves to water down policy
Ministers made the move as part of a plan to impose a new cap on those able to claim full agricultural property relief (APR) and business property relief (BPR). But the National Farmers' Union has warned that scores of family farms, which can often be cash-poor even if the land has a substantial value, risk being split up as a result. 'Better targeted' reforms In a report published on Thursday, CenTax estimated that working farmers were more likely to be hit by the raid than wealthy landowners. While it largely endorsed the reforms, saying they were 'better than the status quo', two options were suggested for 'better targeting' the changes while still raising at least as much revenue overall. The first, branded the 'minimum share rule', would remove inheritance tax relief for 'passive investors' in farmland and other business assets, so they cannot be used as a 'tax shelter'. This would fund an extension of 100 per cent inheritance tax relief for farmers and other business owners to £5m per estate. The report said: 'This adjustment would better target estates using APR and BPR for tax planning, whilst extending protection for family farms and other businesses.' The second option would cap inheritance tax relief to the first £10m of a claim. This would fund an extension in the allowance for 100 per cent relief to £2m per estate. 'Reasonable and fair' After the farm tax was announced, James Murray, the Treasury minister, and Daniel Zeichner, the rural affairs minister, used CenTax to justify the raid, claiming the think tank considered it 'reasonable and fair'. Ministers have said that the controversial reforms are intended to stop rich landowners avoiding the levy while protecting small family farms. Last year, Mr Zeichner told MPs: 'Currently, small farms can find themselves facing the same levels of tax bills as much larger farms, despite having a much smaller asset. Twenty per cent of agricultural property relief is claimed by the top 2 per cent; 40 per cent is claimed by the top 7 per cent. 'That is not fair, it is not sustainable, and sadly, it has been used in some cases by wealthy landowners to avoid inheritance tax. That is why the Government has announced plans to reform agricultural property relief.' However, CenTax found working farmers were most likely to be stung by the change. The think tank estimated the impact of the policy on different types of 'farm estate', defined as the total wealth of a person who died owning farmland or assets, as opposed to the value of a physical farm. It found that just 20 per cent of landowner estates would be hit by the tax, compared to 25 per cent of tenant farmer estates, 45 per cent of owner-farmer estates, and 67 per cent mixed tenure estates. In a statement accompanying the report, CenTax said: 'Landowners are less likely to be impacted by the reform than working farmers, representing 64 per cent of all farm estates but 42 per cent of impacted farm estates. Owner-farmers represent 17 per cent of all farm estates but 37 per cent of impacted farm estates.'
Times
5 days ago
- Business
- Times
How Rachel Reeves can fix farm tax, by experts who sparked the idea
Tax analysts credited with inspiring the government's family farm tax have now said it will hit small family farms and could be improved. From April next year all inherited agricultural assets worth more than £1 million, which were previously exempt, will have to pay inheritance tax at 20 per cent, in a bid to raise £520 million a year by 2029. A new analysis by the Centre for the Analysis of Taxation (CenTax), which is credited with giving Rachel Reeves the idea for the tax reform, found that only 20 per cent of non-farming landowners would be affected by the changes, while 67 per cent of farmer-owners, 25 per cent of tenant farmers and 45 per cent of mixed tenure farmers would be hit. The report says between 480 to 600 farm estates per year would face higher tax bills, with around 205 — 43 per cent of all impacted farm estates — potentially comprising 'small family farms' with an estate valued at less than £5 million. A 'farm estate' is the total wealth of an individual who dies owning some farmland or other farm assets on which they claimed tax relief. The CenTax report highlights that 64 per cent of all 'farm estates' in the country belong to non-farming landowners. The report's authors claim that 86 per cent of affected farm estates could pay their inheritance tax bill out of 'non-farm assets', leaving around 70 farm estates a year that could not. Of these, around 40 farm estates would face a residual bill greater than 20 per cent of the farm's income, if paid in ten annual instalments. The National Farmers' Union (NFU) says that the majority of medium-sized working farms would not be protected by a ten-year payment window because they 'don't earn enough money to pay the potential inheritance tax bill without selling off some of their land or business, which in turn makes the farm business unviable'.The average return of working farm businesses, which can be worth many millions in assets, is less than 1 per cent. The CenTax report, funded by the Nuffield Foundation and Abrdn Financial Fairness Trust, lays out two options for 'better targeting the reform'. One suggestion is for a 'minimum share rule' that would remove tax relief for passive investors in farmland and other business assets, which would fund an extension of 100 per cent relief for farmers and other business owners to £5 million per estate. Alternatively, an 'upper limit on relief' is suggested that would cap relief at the first £10 million of any claim, funding an increase in the allowance for 100 per cent relief to £2 million per estate. Andy Summers, director of CenTax and an associate professor at London School of Economics and Political Science, said: 'Our analysis shows that the government's reform largely protects family farms whilst limiting claims by the wealthiest estates. But the relief could be better targeted to reduce its use for tax planning and further extend protection for businesses, including farms.'Tom Bradshaw, president of the NFU, said: 'We welcome this detailed report by CenTax which recognises that working farms will be disproportionately affected by this tax. This is not a fair and balanced approach to reform and does little to counter those who seek to shelter wealth from inheritance tax by simply investing in farmland. 'We think this new independent analysis presents a positive and timely opportunity ahead of the Finance Bill for fresh conversations with government and officials that would allow us all to work together to address issues of fairness and affordability within the proposals. The NFU urges government to grasp this opportunity.' The NFU and the Country Land and Business Association (CLA) are proposing an alternative 'clawback' scheme to ministers, where a 40 per cent inheritance tax would be applied to assets if sold by a family successor within seven years of the owner's death. It would mean those who continue to farm would not be hit with crippling inheritance tax bills, and those who decide to sell would have the cash in the bank and be able to pay. A government spokesman said: 'We designed these upcoming reforms so they address stark unfairness in the distribution of reliefs, whilst ensuring that the few estates facing higher bills can pay them in a manageable way. This report supports that. 'We're also investing billions of pounds in sustainable food production and nature's recovery, slashing costs for food producers to export to the European Union and have appointed former NFU president Baroness Batters to advise on reforms to boost farmers' profits.'
The Guardian
5 days ago
- Business
- The Guardian
Farmers' union asks to meet Rachel Reeves after new report on inheritance tax reforms
The National Farmers' Union (NFU) has called for a meeting with Rachel Reeves to discuss changes to Labour's inheritance tax reforms, after fresh evidence from tax experts that the planned changes may not achieve their stated goal of removing the incentive for rich people to shelter their wealth from tax by buying up farmland. The chancellor's plan, which comes into force next April, 'largely protects family farms whilst limiting claims by the wealthiest estates', according to a new report by researchers at the Centre for the Analysis of Taxation (CenTax), which has proposed amendments to the inheritance tax changes. However, Dr Andy Summers, the director of CenTax and an associate professor at the London School of Economics, said: 'The relief could be better targeted to reduce its use for tax planning and further extend protection for businesses, including farms.' The chancellor's announcement in last October's budget that she was bringing farms and other agricultural property into inheritance tax rules to raise money for public services and close a tax loophole exploited by some wealthy landowners sparked uproar. Farmers responded with large-scale protests and drowned out ministers' speeches with tractor horns after Reeves said she was ending a decades-long exemption for farms and would make inheritors pay 20% of the value of agricultural and business property above £1m. In an average year, the vast majority (86%) of farm estates affected by the inheritance tax changes could pay the entire tax bill using non-farm assets, the CenTax analysis found, leaving 70 estates out of 1,560 farms which could not. The NFU has repeatedly voiced its opposition, warning of threats to the UK's family farms and the nation's food security. However, the union's president, Tom Bradshaw, told the Guardian he welcomed the CenTax report and called on the chancellor and her officials to discuss the findings before April. 'This report gives us an opportunity to sit around the table and try to adjust the recommendations that have been made so far to target them better and remove the worst of the impact from the working family farms,' he said. 'I really worry about the period through the autumn and the winter ahead of April, and we've got to try to get changes in place that mitigate the impact, but still meet Treasury requirements.' CenTax's analysis also found that landowners are less likely to be affected by the tax reforms than working farmers, as they represent almost two-thirds (64%) of all farm estates but only 42% of affected farm estates. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion It also found that owner-farmers account for 17% of all farm estates, but more than a third (37%) of affected farm estates. Bradshaw said this showed wealthy landowners 'can afford to pay the tax without having to sell assets, whereas a much greater percentage of family farms will have to sell assets or sell part of the farm to pay the inheritance tax'. 'If it forces the sale of some farmland, it may well mean that the farm is no longer viable, it will reduce the ability to continue producing food,' he said. It came as Reeves said decisions around taxes would not be announced until the autumn budget, after the Guardian reported that she was looking at ways to raise more money from inheritance tax amid growing pressure on the UK's finances. The chancellor told reporters on Thursday that decisions would be made 'in the round' and the key focus of the budget would be to 'boost productivity and growth and prosperity all across the country'.
Telegraph
27-07-2025
- Business
- Telegraph
Labour's delusional think tanks are making a bad situation worse
We need more rights for workers who fall sick, according to the Resolution Foundation this week. We need more protection for the environment before building homes according to the Wildlife Trust. And we need higher taxes on capital and wealth according to CenTax, a key adviser to the Chancellor. Over the past few weeks, the handful of think tanks that dominate Labour politics have been busier than ever. There is just one problem. They are all completely delusional. By constantly pushing pet Labour causes such as more workers' rights, more regulation and higher taxes, they keep shifting the party to the Left – and they are rapidly bankrupting the country. It has been another busy few weeks for the wonks who come up with the policy ideas that feed into the Government machine. The Resolution Foundation put out a report urging the Government to give more rights to workers on sick leave, and make it harder to fire people when they are off work on account of ill health. The Wildlife Trust, along with Royal Society for the Preservation of Birds and the National Trust, have been pressuring ministers to strengthen the protection of the environment as its planning reform bill goes through Parliament. Meanwhile CenTax, the tax research organisation that provided much of the inspiration for closing the non-dom rules, is as busy as ever with reports on reforming, otherwise known as increasing, inheritance tax and the levies on private equity, while the Fabian Society has been urging a £2,000 a year pay rise for care workers. Sure, it is perfectly possible to make a well-meaning case for any of the policies taken in isolation. Given that more than four million people, or 10pc of the working age population, are now on sickness benefits we probably do need to do more to encourage them back into work, and extra rights may well help with that. But what happens if a company is in deep financial trouble, needs to slim down the workforce, but can't lay off the people who have been off work with stress or anxiety for months? It won't be able to, and may go bust instead. We might all agree that individual species and the environment need to be protected. But planning reform is a flagship policy for this Government, and probably its only remaining chance of getting the economy growing again, and giving a handful of pressure groups an effective veto over what can and can't be built will kill that stone dead. CenTax still seems to be oddly influential within the Treasury given that last year its analysis was that abolishing non-dom status would raise a net £3.6bn for the Treasury, and not, as it turned out, that the flights to Dubai and the Caribbean would suddenly be packed with wealthy foreign entrepreneurs and investors fleeing Britain. Meanwhile, we would probably all like to see care workers get a pay rise, especially as we need to stop the sector relying so heavily on cheap, imported labour. But given that local councils, which pay most of the bills, are going broke all around the country, it is hard to work out who is going to pay the bills for that? The think tanks feeding ideas into the Government apparatus have become completely delusional. None of them appears to recognise for a single moment that the UK is rapidly going broke. Only this week, the latest tax and borrowing statistics made it clear just how precarious the country's financial position has become. The Government had to tap the markets for an extra £20.6bn in June, far more than expected, and the second-highest June figure since records began. Over the first three months of this financial year we have borrowed another £57bn, and are well on track to hit £200bn over the course of the full 12 months. If the economy remains stagnant, and even more non-doms flee, and many more companies decide to slim down their workforce because they can't afford the extra National Insurance charges (and the figures are already coming in at less than was forecast) then the total will easily hit £250bn and perhaps more. There is only one word for that. Broke. Yet Labour's policy outriders appear to be operating on a completely different planet. The Government still has plenty of money. There are plenty of taxes that can still be easily raised without hitting working people or damaging the economy. There is ample room to borrow more and, if the Government does, the investment will pay for itself with faster growth. Even worse, they have become dangerously embedded in the Starmer administration. Torsten Bell, who used to run the Resolution Foundation, is now the pensions minister. Many of the Cabinet are members of the Fabian Society, while others have made an effortless transition from the think tanks to the backbenches and then into government. And special advisers who dominate policy-making typically have a background in one think tank or another. It is a network of influence with deep roots. The British economy faces plenty of threats right now. Donald Trump's very public battle with the Federal Reserve chairman Jay Powell may crash the stock market and destabilise the dollar. Tariffs may plunge the eurozone into a recession hitting our biggest export market. The Chinese economy may finally tank. Or, more plausibly, the slow grind of ever-increasing taxes and the burden of constantly rising regulation may well mean the UK faces 25 years of near-zero growth, much as Italy has over the last quarter of a century. But the biggest threat may well turn out to be the so-called policy experts dreaming up yet more plans for tax and spending. They have become a danger to economic stability. And at the rate at which they are currently churning out expensive, unrealistic proposals, very soon they will bankrupt the country.
