It has been reported that the government is considering tweaks to the proposed tax reforms affecting farming families.
With the upcoming Autumn Budget only weeks away, there have been several reports that ministers are considering changes to the controversial Inheritance Tax (IHT) reforms announced last year, which would see a 20% tax on estates worth more than £1m.
Amidst petitions and protests from worried farming communities, who say that the changes would have catastrophic consequences for many family-owned farm businesses, new reports suggest the threshold could be raised from £1m to £5m (£10m for a married couple), which would make a significant difference to many.
According to expert lawyer Esther Woolford, the changes would be welcome but should be taken with a note of caution.
Esther, partner and agriculture sector lead at national law firm Clarke Willmott LLP, says now is the time for farming businesses to look ahead and plan for the changes coming in regardless.
“Our Agricultural Team would welcome the reported reconsideration of the government’s proposed changes to inheritance tax (IHT) affecting farm owners. However, we must temper what we say below with a strong note of caution that the reported rumours may flow more from wishful thinking than real substance.
“The initial Autumn Budget announcement, which sought to cap Agricultural Property Relief (APR) and Business Property Relief (BPR) at £1 million, raised serious concerns across farming communities posing an existential threat to generational succession and the future of family farms.
“We, amongst many, questioned the government’s methodology to its claimed goal of reducing the attractiveness of farmland as a tax haven but instead devising a scheme that will impact a significant number of family farming businesses and our countries food security.
“The rumoured adjustment of the threshold from £1 million to £5 million (£10 million for couples) will bring a collective ‘holding of breath’ for those within the agricultural sector. It may be an indication that the government is starting to listen to the profound concerns about the future viability of family farms.
“With that being said, caution is paramount as this is only a rumoured change and not official legislation. As of this moment, the initial Autumn Budget represents the legislation as currently drafted and is set to come into force. Farmers should therefore continue to consult with their professional advisors, that understand the intricacies of agricultural estates, to prepare for multiple scenarios to protect the next generation.
“It is unlikely that the agricultural sector will return to a time of 100% IHT relief and therefore planning is the only way to ensure long term viability of the family farm.”
Part of the shift in succession planning, according to Esther, is engaging the next generation and for many families there are upsides to this. Younger family members becoming owners earlier can foster a stronger sense of responsibility and long-term thinking.
But succession isn’t a one-off event. The next generation will face the same challenges, so planning must be cyclical and continuous. Business owners need to question whether the farm business is resilient enough to support multiple generations while absorbing new tax burdens.
Esther said: “We of course urge the government to ensure that any reform is not only fiscally sound but also socially and economically fair. Farming is not just a business, it’s a way of life and the proposed changes must start to reflect that. Afterall, and as the government keeps telling us “food security is national security”.
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