Farmer's IHT

[dcbwhaley]

Do family run farms deserve preferential tax status over other small family businesses?
The current exemptions are a gift to rich bar stewards like Clarkson.
And there are several ways of minimising or even avoiding IHT

 

[Richard123]

Your average farmer is unaffected by the IHT changes. It doesn't kick in until £1m (on top of existing allowances). If your house is on the family farm and you are married, more like £2-3m.

The way they have been manipulated by a tax avoiding minority, and their obedient media, is cynical.

 

[trainmania100]

Aren't farmers getting £5bn in support from the government to help sustainability? Plugging this hole left by the conservatives was never going to be easy

 

[brad465]

Aren't farmers getting £5bn in support from the government to help sustainability? Plugging this hole left by the conservatives was never going to be easy

If they are, Labour have been incredibly poor at communicating this (among several other policies).

 

[Haywain]

Are these the same farmers who protested about the effects of Brexit, and against the trade deals signed off by Kemi Badenoch, who are now welcoming Badenoch and Farage to their protests?

 

[Yew]

If they are, Labour have been incredibly poor at communicating this (among several other policies).

The papers are owned by people who would really rather have a convenient tax dodge, it's not in their intrests to cover it.

 

[Cloud Strife]

Do family run farms deserve preferential tax status over other small family businesses?

Absolutely not. IHT is a terrible tax, but it should be applied to everyone equally. Anyway, it's simple enough for farmland to be owned by a trust or a limited company, so I'm really not sure what the crying is about.

 

[Harpo]

Any other family business being inherited is subject to IHT. Why is this so special?

Second, there’s no impact on ‘today’. It’s about the afterlife. But then we’re a nation where inheriting privilege is still deep-rooted.

Lastly, Clarkson? Is this the same Clarkson that told the Times in 2021 that avoiding inheritance tax was “the critical thing” in his decision to buy land??

The MailGraph Express won’t let facts interupt the war against Labour.

 

[dgl]

Maybe if farmland cannot be used as a tax dodge then maybe the price of farmland will go down and we'll actually get more farmers. For a genuine farmer if the value of their land goes down it should not be an issue, they'll want to keep it as farmland and hand it down so they'll never see any financial gain from their land being worth more or any financial loss from it being devalued.
The farmer himself really should be the one owning the land if we want to keep farming competitive, having to lease you land off someone else must be more expensive in the grand scheme of things, not only because the leaseholder will want to see some return on their investment even if it is meant just to avoid tax.

Of course it's an easy tax to chastise Labour for because it supposedly hurts a lot of hard working farmers and not some greedy bankers, well that is what is portrayed, in essence it'll hurt very few actual poor working farmers and actually hit lot of rich people. The newspapers will keep up with their BS to please the people they actually want to help and couldn't give a toss about real farmers and would probably be quite happy to kick the farmers that they are supposedly supporting off their land if they could sell it and make a quick buck.

 

[JamesT]

Any other family business being inherited is subject to IHT. Why is this so special?

Second, there’s no impact on ‘today’. It’s about the afterlife. But then we’re a nation where inheriting privilege is still deep-rooted.

Lastly, Clarkson? Is this the same Clarkson that told the Times in 2021 that avoiding inheritance tax was “the critical thing” in his decision to buy land??

The MailGraph Express won’t let facts interupt the war against Labour.

Although the noise has been around farmers, currently there is relief from inheritance tax for all business property owners: https://www.gov.uk/business-relief-inheritance-tax

Business Relief reduces the value of a business or its assets when working out how much Inheritance Tax has to be paid.

Any ownership of a business, or share of a business, is included in the estate for Inheritance Tax purposes.

You can get Business Relief of either 50% or 100% on some of an estate’s business assets, which can be passed on:

while the owner is still alive
as part of the will

Reeves has taken an axe to all of it.

 

[Ediswan]

Lastly, Clarkson? Is this the same Clarkson that told the Times in 2021 that avoiding inheritance tax was “the critical thing” in his decision to buy land??

Clarkson is an oaf. He got very defensive earlier this week when that previous interview was quoted back to him.

Unless a farmer (or somebody with experience of generational farming economcs) contributes here, we are unlikely to see all sides of the debate.

 

[Howardh]

I'm not defending rich land-owners who should pay their fair share!

But I see the IHT difficulty with farms being the passing over of land, which has value but not the cash behind it, eg if £200k neds to be found in order to pass the land from parent to child, that £200k (or even £20k/yr over 10 years) may not be physically there.

Think the answer is that the IHT must be paid but in order to fund the tax bill, from now on farmers who think they will need to pay IHT on their death should pre-fund via a trust which could build up over the years. This is what was offered to my parents and myself when we discussed IHT with our advisors; however they required fees to administer it so we decided that my parents "gifted" me a tax-free £3k each every year which built up and allowed me to pay the IHT bill on second death. If farmers can't afford something like that, then the chances are they won't be hit by an IHT bill down the line.

 

[Cloud Strife]

But I see the IHT difficulty with farms being the passing over of land, which has value but not the cash behind it, eg if £200k neds to be found in order to pass the land from parent to child, that £200k (or even £20k/yr over 10 years) may not be physically there.

The simple answer would be to allow IHT to be deferred, provided that the farmland remains solely as farmland and is used as such, along with any buildings. You could allow it to be indefinitely deferred, but the bill would become due if there was any change of use. Essentially, you allow farmland and agricultural buildings to be continued to used as such without tax penalties, but only if it's maintained as a farm.

 

[wilbers]

On of the unfairnesses with it being introduced with so little notice is that everyone else has been able to plan using the 7 year rule (give asset away and live at least another 7 years, no IHT to pay), but elderly farmers who had no need to do that before now can't. May well be the one thing about it that gets tweaked before it comes in - Labour don't really want to incentivize any elderly farmers to die very slightly before they otherwise would in early 2026.

 

[alex397]

Yet again the media, which seems dominated by a right wing viewpoint, has successfully made the rich and wealthy appear as ‘one of us’. Seeing as the majority of farmers appear to be unaffected, which I presume most don’t realise, I struggle to understand the fuss behind all this.


I don’t really think we need to set up a JustGiving page for Clarkson, Dyson and Lloyd-Webber, though I wouldn’t be surprised if a Reform candidate sets one up. The Reform Company Party for Faversham and Mid Kent sent up a Routemaster (RML2402, which appears to be based near Sittingbourne) with a handful of people to join the protest. Either they knowingly want to support rich landowners, or they actually don’t realise the majority of farmers will not be affected.

 

[Andyh82]

I find it all a bit weird with strange optics

Go back 6 months and you had doctors going on strike at war with the government, and the accepted view on social media and elsewhere was that the public was on the side of the strikers

Now you’ve got farmers protesting and the accepted view is that everyone is not on their side

At one time ‘bankers’ were the demonised group to be the butt of the joke on comedy shows and the like, I didn’t have it on my 2024 bingo card that they would be replaced by farmers

 

[alex397]

At one time ‘bankers’ were the demonised group to be the butt of the joke on comedy shows and the like, I didn’t have it on my 2024 bingo card that they would be replaced by farmers

Im not sure it’s farmers as a whole who are the demonised group. It’s more the likes of Clarkson, Dyson et al. I feel many of those promoting these protests arn’t really on the side of the majority of farmers, most of which it seems won’t be affected by the proposed changes.
The fact Farage was there also adds to my skepticism. This is a man who campaigned for and is arguably partially responsible for, a Brexit which damaged the British farming industry.

 

[Magdalia]

This is what I said in another discussion recently.

The changes to inheritance tax on agricultural land are being done because they are good economics.

Getting high economic growth is dependent on making the most efficient and effective use of scarce economic resources. One of those scarce resources is land. In the UK we haven't made lots of new land since drainage here in the Fens more than 300 years ago.

A good way of using a scarce resource better is getting rid of tax breaks that impede that resource from getting into the hands of the people who can use it most efficiently and effectively. In the case of land, that's not people who are buying it to avoid inheritance tax, thereby increasing the price which is then a barrier to entry for new more efficient and effective farmers.

Farmers currently moan a lot about what a poor return on investment they get. That's a clear economic signal that agricultural land is not being used efficiently and effectively. Two things will change that for the better: getting rid of the premium on land prices, created by the tax break, so that less capital is needed for the same output, and lowering barriers to entry so that innovative new farmers can get onto the land and earn a higher return.

In the context of improving economic growth, and helping agriculture to get a better return on investment, the government need to make the change.

On of the unfairnesses with it being introduced with so little notice is that everyone else has been able to plan using the 7 year rule (give asset away and live at least another 7 years, no IHT to pay), but elderly farmers who had no need to do that before now can't. May well be the one thing about it that gets tweaked before it comes in - Labour don't really want to incentivize any elderly farmers to die very slightly before they otherwise would in early 2026.

This is the aspect where I think the government needs to make a concession. This is because the current proposal creates a perverse incentive for owners not expecting to live for 7 more years. Bluntly it will be more tax efficient for them to die before April 2026, and that shouldn't be hanging over anyone's head.

Given that these are family farms, they tend to get inherited once every generation, say 25-30 years. Under the existing arrangements only about 3-4% of farms will get inherited in any given year, and only about 20-30% of them will get inherited within the next 7 years.

The tricky thing with the gift exemption is that nobody knows for sure whether they are going to live for 7 more years or not, but, for 70-80% of potentially liable farms, the owners have plenty of time to rearrange their affairs for the new circumstances. But there are 20-30% of farms where, if the owners had known what was coming, the owners might have made gifts to their children already.

I think that the way out is for farmers above, say 75, to be allowed to make gifts backdated 7 years or to their 75th birthday, whichever is the shortest. In this example any farmer over 82 would be able to backdate the full 7 years. 75 and 82 may not be the right numbers, that would be for HM Treasury and HM Revenue and Customs to work out.

 

[Ediswan]

The tricky thing with the gift exemption is that nobody knows for sure whether they are going to live for 7 more years or not, but, for 70-80% of potentially liable farms, the owners have plenty of time to rearrange their affairs for the new circumstances. But there are 20-30% of farms where, if the owners had known what was coming, the owners might have made gifts to their children already.

Another issue with gifting is where does the older farmer live ? They are not allowed to live in the gifted property rent-free, they have to pay the market rate. The farmers at issues likely have no other source of income. (As ever, there will be exceptions.)

 

[Haywain]

Some figures were mentioned on Question Time on Thursday evening about how many farms are affected by this change. The figure given by the government minister on the programme was 27% of farms are potentially affected and it seems to be agreed that in total there are 200,000 farms in total. So, that's 54,000 farms affected and, as it will take on not just the farmers but also those who stand to inherit those farms, a rather higher number of farmers and their families upset by this. However, there are also three times that number unaffected so we are being asked to sympathise with a minority, many of whom are extremely wealthy. Even those affected have been given a minimum of 18 months warning and, in what's like to be a high proportion of cases, potentially many years warning so the number who will be able to plan for this is actually massive.

 

[wilbers]

Another issue with gifting is where does the older farmer live ? They are not allowed to live in the gifted property rent-free, they have to pay the market rate. The farmers at issues likely have no other source of income. (As ever, there will be exceptions.)

Its possible to only gift a portion of the farm (so what remains is within the 0% IHT limits), or to gift the farm and retain partial ownership of the farmhouse specifically. Can do the same sort of thing with residential houses - live in it with someone else but only give half of it away, and no one needs to pay rent.

 

[Mogster]

Many farms don’t have disposable assets, the money is in the land, buildings and infrastructure. In the farming community success seems to be measured by how much more land you leave to your kids compared to your parents. I can understand how selling land to developers or agricultural equipment to pay HMRC seems counterproductive. The government says few farm sales will be affected but then says 500 a year, which seems a lot.

Surely there could be a compromise where farmed land and essential agricultural equipment isn’t included in IHT but the barn with the collection of antique Ferraris is?

 

[Magdalia]

Surely there could be a compromise where farmed land and essential agricultural equipment isn’t included in IHT but the barn with the collection of antique Ferraris is?

That still leaves agricultural land as an inheritance tax dodge, encouraging non farmers to buy as a store of value, forcing up the price of land and acting as a barrier to entry for new farmers.

 

[Haywain]

Surely there could be a compromise where farmed land and essential agricultural equipment isn’t included in IHT but the barn with the collection of antique Ferraris is?

So what happens when the Ferraris are in the same barn as a load of agricultural equipment?

 

[Ediswan]

I found this summary of what the current system of Agricultural Property Relief applies to, including what is not covered:
https://www.carterjonas.co.uk/agricultural-property-relief

WHAT IS AGRICULTURAL PROPERTY?

Agricultural property is land or pasture that is used to grow crops or to rear animals intensively. It includes:

• Growing crops
• Stud farms for breeding and rearing horses, and grazing
• Short rotation coppice
• Land not currently farmed under the Habitat Scheme
• Land not currently being farmed under a crop rotation scheme
• Some agricultural shares and securities
• Farm buildings, farm cottages and farmhouses

It is important to recognise that if horses are grazing land for non-agricultural purposes, the land would be considered non-agricultural and will not be eligible for APR.

Agricultural assets which do not qualify for APR include:

• Farm equipment and machinery
• Derelict buildings
• Harvested crops
• Livestock
• Property subject to a binding contract for sale

The full article gives more detail.

 

[Drogba11CFC]

The fact that Dale Vince is in favour of it is enough for me to oppose it.