MPs call for year-long delay to farm inheritance tax

Farm inheritance tax changes should be delayed by a year and alternative schemes that will not harm small family businesses need to be properly considered, a committee of MPs has warned.

Government plans to tax inherited agricultural assets worth more than £1m at a rate of 20% – half the usual rate – saw protests across the UK after they were announced in the Autumn Budget.

In a report released on Friday, the Environment, Food and Rural Affairs (Efra) Committee said the changes were made without "adequate consultation, impact assessment or affordability assessment".

The government said its inheritance tax reforms were "vital" and its commitment to farmers was "steadfast".

Efra's report said the tax reforms "threaten to affect the most vulnerable" but delaying the implementation of the policy until April 2027 would give those farmers more time to seek "appropriate professional advice".

National Farmers' Union (NFU) president Tom Bradshaw said a delay "doesn't take the terrible pressure off older farmers".

He said the policy remained "fundamentally unfit, destructive, badly constructed and must be changed".

The government says the changes will only affect the wealthiest 500 farms each year, but the NFU and the Country Land and Business Association (CLA) estimate that up to 70,000 farms could be affected overall.

The committee also warned that the government's sudden closure of the Sustainable Farming Incentive (SFI) environmental payments scheme "affected trust in the government" and left many farmers "at risk of becoming unviable".

When the SFI scheme, which more than 50,000 farm businesses are signed up to, was closed in March, the NFU described it as another "shattering blow" to farmers.

The Department for Environment, Food and Rural Affairs (Defra) has since announced it will allow SFI applications that were in progress within two months of its closure.

But the committee said that lessons should be learned and that "a restoration of trust is urgently required".

Efra committee chairman Alistair Carmichael said the confidence and wellbeing of farmers had been affected negatively.

"The government, however, seems to be dismissing farmers' concerns and ignoring the strength of feeling evidenced in the months of protests that saw tractors converge on Westminster and up and down the country," he added.

The CLA, which represents 28,000 farmers and rural businesses, urged the government to rethink its "current disastrous policy" on inheritance tax.

It said the government should consider an alternative "clawback" scheme, under which 100% agricultural and business property reliefs would remain but inheritance tax would be applied to assets if sold within a certain period of time post-death, payable out of the proceeds of the sale.

CLA president Victoria Vyvyan said the "clawback" proposal would limit the damage to family businesses while targeting "those who have bought land to shelter wealth for short-term gain".

"The government has dug itself into a deep hole by targeting family farms and businesses, and must now pause, listen and consult," she said.

But a government spokesman said that under its changes three quarters of estates would continue to pay no inheritance tax at all, while the remaining quarter would "pay half the inheritance tax that most people pay".

He added that payments could be spread over 10 years, interest-free.

Details of a new SFI scheme will be announced after the upcoming spending review.

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