Inheritance Tax reliefs – another attack?
Amidst all the furore surrounding Brexit and the consequences for agriculture and owners of farmland, it is easy to concentrate on the day to day news whilst overlooking some of the reports which do not immediately hit the headlines.
In June, the lobbying organisation “Tax Justice UK” published a report entitled “In Stark Relief – How Inheritance Tax breaks Favour the well off”. Leaving aside the point that this title is rather stating the obvious – when a tax cuts in at £325k, any reliefs are hardly likely to favour those on the breadline – its main findings are that 495 families were able to claim business or agricultural property reliefs worth some £668m in 2015/6.
Whilst the publishers of the report claim to be politically non-aligned, the comparisons that are made between the cost of the relief, the cost of nurses pay, and the cross referencing to surveys by the left leaning Fabian Society cast some doubt on that assertion.
The report also ignores the fact that successive governments have created these reliefs and, according to recent reports by the office for tax simplification, they are largely doing what parliament intended.
There is one major logic flaw in the findings which state that:
“The special treatments for agricultural and business property are often justified as a means of protecting small family farms and businesses but the reality is different…in 2017 just 40% of agricultural land was purchased by farmers, down from over 60% in 2011, while investors have flocked to buy agricultural land and property.”
This figure was based on the experience of a single high end land agent and is unlikely to be representative of the market as a whole. Not least because it will not include the many private deals made between neighbouring farmers which do not pass through land agents at all, nor the very many smaller transactions arranged by local agents. It also implies that the value of transactions in one year is in some way representative of the distribution of land as a whole. Since only about 2% of agricultural land changes hands each year, this contention is erroneous.
Finally, and looking at the statistics within the report, almost half the agricultural relief is given to estates between £1m and £2.5m. If this were to be agricultural property, these will be farms of 100-300 acres. Even in the highest tier of estates, the median value is £4m which implies a farm of about 500 acres. Mentioning these type of family farms in the same context as “ultra-rich tycoons like James Dyson” or “Deeply unequal land ownership “in the UK” is close to being deliberately misleading.
Nonetheless, much as the report is open to criticism and whilst one might query its alleged impartiality, it is in the public domain and will undoubtedly be cited by some as independent findings whose recommendations should be adopted. Numbers can be quoted and requoted, in or out of context – and the headline of “tax breaks favour the well-off” is one that will not go away.
With parliament otherwise preoccupied, and no firm date set for an election, those wishing to take advantage of the current capital tax regime could do well to move sooner rather than later.
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For further information on this subject or to discuss how we can help with your business and its future plans. Please contact Head of Agriculture, Partner Sarah Dodds at firstname.lastname@example.org or call 01733 568 491.