MPs urge the government not to change business and agricultural reliefs

Harriet Cross (Con) said there was ‘growing anxiety’ amongst farmers and family business owners about potential changes to agricultural and business property reliefs (APR and BPR) for inheritance tax. She argued that APR and BPR play an important role in securing the longevity of farming and family businesses, and APR ensures that farms can be passed to the next generation without a ‘crippling’ inheritance tax bill.

Cross suggested that any changes to APR in the upcoming Budget would have a ‘detrimental’ impact on the tenancy sector and the next generation of farmers.

Markus Campbell-Savours (Lab) intervened to suggest that the Tenant Farmers Association (TFA) argue that reforming these taxes could be beneficial to long-term tenancies. 

Cross responded that: “We need to look at the agricultural sector as a whole. If land is being taken out of farming for any purpose, it is not going to be available for tenants”. She said APR and BPR are the ‘foundation’ of thriving, sustainable and entrepreneurial in the UK and support farmers and family businesses.

Alistair Carmichael (Lib Dem) also referenced the TFA which has highlighted that: “If APR was abolished this will make things hugely much more difficult for farm tenants.” He added that inheritance tax can be avoided by ‘intra vires transfers’ from one generation to another, but these can work in an arbitrary way and can lead to difficult personal consequences . He hoped that if these measures we were in the Budget we would see “the government’s direction of travel and the overall picture that they want to achieve, rather than just one quick hit”.

Aphra Brandreth (Con) urged the government to think again, saying if they remove protections that are in place to exempt farmland from inheritance tax, they will put food security at risk.

The DUP MP Jim Shannon argued that “APR is not a loophole for the wealthy”, saying that without it, family-run enterprises could be forced to sell land and assets to pay for inheritance tax liabilities. He called on the government to not reduce or remove the relief, making a case that families cannot “afford the tax burden”.

Patrick Spencer (Con) considered the proposed changes a ‘bad idea’ for two reasons. “First, as with the taxation of many forms of capital, liquidity is being demanded from a resource that is fundamentally illiquid”, he said. Secondly, those who can afford a new tax on their farm and business would have to reallocate a lot of their capital away from more productive sources of investment, such as cattle, machinery and labour. He believed this move could have a negative impact on the economy.

Will Forster (Lib Dem) said that currently inheritance tax is ‘quite unfair’, claiming that the tax rate is “very high” by international standards. He hoped everyone would agree that it was a worthwhile aim to make sure that family businesses can pass from one generation to the next. But he noted that experts “point out that certain provisions within business property relief are not particularly well targeted at local family businesses or small businesses, which are usually the ones in most need of support”. He said that the Liberal Democrats would focus on tax changes to make the system ‘fairer’. These would target banks and oil and gas companies rather than inheritance tax.

Nigel Huddleston, Shadow Financial Secretary, urged the Treasury to reflect on the concerns raised by members, highlighting that these reliefs play a vital role in investment decisions and business planning. He continued, saying that “we do not have a wealth tax in this country, but that there are taxes on wealth”, emphasising the importance of inheritance tax in generating revenue for the Treasury.

Huddleston suggested that the UK has a ‘progressive’ tax system with the top 1% of taxpayers paying 28% of all income tax and the vast majority of estates not paying inheritance tax because of exemptions and reliefs. He said that while there is ‘abuse’ and ‘loopholes’ in the tax system these reliefs “are there for a reason”. He emphasised that without them many farmers and businesses would ‘cease’ to exist.

The Shadow Financial Secretary claimed that the removal of BPR from the alternative investment market could result in a loss of between £14 billion and £21 billion in value to UK shareholders and would permanently damage the AIM. He suggested that removing these reliefs would break Labour’s manifesto pledge of not increasing taxes on working people: “farmers and family business owners are very clearly working people”. He called on the minister to provide some reassurance on this matter.

The Exchequer Secretary to the Treasury, James Murray, welcomed MPs' view on these reliefs but said that he wouldn’t be able to comment on any Budget speculation. He explained how inheritance tax and the reliefs being discussed work, noting that views on them differ. Murray assured the MPs that the government will keep all taxes under review and the Chancellor will announce the changes to the tax system at the Budget.

Full debate.