IFS family farm tax: Government needs to swallow their pride and axe the tax
Responding to the IFS suggesting that the Government changes its proposals to farmland inheritance tax, Liberal Democrat Environment spokesperson Tim Farron MP said:
The Government hid behind the IFS to try and justify this disastrous policy. That very same organisation is now telling them that their own proposals need an overhaul.
It would be beggars belief for the government to continue to push forward with these stupid plans.
They need to swallow their pride, realise the damage this family farm tax will do and axe the tax.
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10 Comments
Rather than argue to reverse the Chancellor of the Exchequer’s proposals, the discussion on farming and inheritance tax (IHT) needs to move on from protest alone to proposing alternatives that genuinely protect family farms but prevent tax avoidance (and inflation of land prices) by wealthy landowners with little or no interest in farming. The continuity of family farms is important for food production and an important glue for sustaining rural communities, making farming related inheritance tax (IHT) concessions justifiable. However, a simpler, fairer, better targeted approach than changing Agricultural Property Relief (APR) is required. Reversing the proposal maintains the status quo with all its associated abuse. Certainly the proposed thresholds could be raised, but that would remain overly complicated and will benefit even more tax avoiders than currently proposed if they fall beneath a raised threshold. It’s also ironic, and harsh, that a Labour government’s proposal disadvantages single parent farmers – e.g. divorced or widowed – who cannot share allowances with a spouse. Practical alternatives, such as a current farm residency requirement, or heirs’ commitments to continue farming for a number of years, or practicing nature-friendly farming practices, in exchange for IHT concessions have not been explored, but still could be (there is much to be learned from such approaches in Europe – especially France). A collaborative effort between the NFU and government on such ideas could break the current deadlock and reset relationships without either side losing too much face.
Perhaps the IFS isn’t as “independent” as it title would suggest, so it is playing to the gallery…
This extract from the press release does not explain very much. Why was the IFS wrong before and right today?
I just want to put my name down as totally opposing Our policy on this, the Governments actions are aimed primarily at Billionaires buying up Farm Land as a Tax Dodge. A few hundreds of Families/Businesses will be affected every Year.
Once again We seem to be opposing for the sake of opposition.
Here’s what the IFS say. Essentially, they are pointing out that genuine and continuing family farmers deserve protection from IHT, and need time to plan by gifting farms to children. The latest Government wheeze would exempt an 80-year-old farmer from IHT, but leave a 79-year-old desperately hoping to survive seven more years in order to avoid the tax. That’s crazily arbitrary. The IFS, much more sensibly, suggest that instead “ministers should give (all) farmers an inheritance tax holiday for the next few years”.
https://www.theguardian.com/environment/2024/nov/25/inheritance-tax-on-farms-should-be-delayed-to-avoid-unfairness-says-thinktank
Patrick Cosgrove (above) has it right. Labour are right in principle when they seek to prevent burgeoning tax avoidance by rich land buyers with no interest in farming. But they way Labour have tackled this issue has been totally incompetent.
I’m not persuaded that a family owned farm should be exempt from inheritance tax while other family owned businesses of equal value are not. The Liberal Democrats need to take a principled stance on inheritance tax that applies equally across the board and doesn’t favour some categories of people over others.
I would hope that the reintroduction on inheritance taxes, albeit at a highly advantageous and discounted rate, on farm land is just the first step in the process of restoring the price of agricultural land to something that might be justifiable on the basis of its return on capital.
I’ve seen claims that it’s as low as 1% p.a. So this would mean that a farm which is capable of generating an income of £50k p.a.would be worth £5 million. Even if it were half this it is clearly a huge barrier to anyone of normal means ever being able to take up an ambition to have a career in farming. The price of farmland has clearly been artificially inflated by speculators seeking to profit from the tax avoiding potential that a purchase of farmland offers.
One of the, perhaps unintended, consequences of under-taxing land is the creation of an asset price bubble. So there is something to be said for a Land Value Tax in this respect. The same can be said to apply to housing. All owner occupiers have an effective hidden income from an imputed rent that would have been taxable at one time (prior to the early 60s) but no longer is.
This lack of taxation has pushed up the price of property and frozen many of the younger generation out of the housing market.
@David Allen – thanks for the article link, that makes sense of things.
I think a key part of the problem is having a land ownership system that doesn’t handle custodianship; a farming family aren’t really the owners, they are just the custodians of the land they farm for future generations. Additionally, the ownership system doesn’t really differentiate between land that cannot really be recovered eg. Agricultural land and ancient woodland, and urban land. Ie. You can demolish the out of town shopping centre (built on farm land) and rebuild, but to revert it to agricultural use or “ancient woodland” is a multi generational undertaking…
“I’m not persuaded that a family owned farm should be exempt from inheritance tax while other family owned businesses of equal value are not.”
This reasonable point could be answered by assessing farmland for IHT just like any other asset, but suspending the IHT liability provided the land continued to be used primarily for farming. So the family farm could continue operating indefinitely without paying IHT, but only if not sold off e.g. for development to realise its capital value. If and when that was done, the accumulated IHT liability would become payable. So a fair share of the windfall capital gain would pass to the State.
As Peter Martin points out, this would also help prick the land price bubble, which deserves to get pricked.
@Mary Fulton – “I’m not persuaded that a family owned farm should be exempt from inheritance tax while other family owned businesses of equal value are not”
“Family” businesses can claim Business Relief against inheritance tax on a similar basis to farms. It’s not quite as generous as the relief on farms, but still significant, and the same arguments for or against largely apply.