5 days ago
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.'
